The European investment fund industry has become a powerful business in its own right. No longer the little brother of banking or insurance. No longer a back-water of the financial industry. Its development has been spectacular. A four-fold increase in the space of a dozen years.
An efficient investment fund industry can help Europe meet pressing structural challenges. Put household savings to work in the real economy. Strengthen financial stability by diversifying risk. Democratise European financial markets. Drive higher standards of corporate governance. Become the vehicle of choice for private retirement provisioning. They can also serve as a ready-made investment solution for occupational pension schemes. In the US 25% of the assets of retirement accounts are invested in mutual funds.

There is significant untapped potential for growth within Europe. Assets managed by EU funds amount to 45% GDP - compared to 70% in the US. Investors in new Member State markets are discovering investment funds for the first time. Finally, there is a burgeoning alternative investment industry currently serving institutional and affluent investors across Europe subject to a patchwork of national placement regimes.

The European fund industry must not limit its ambitions to the local marketplace. Worldwide, the fund industry manages €12 trillion. European managers account for one third of this. European managed funds are recognised in Asia and South America. European fund managers can build on this success.

This is an industry with a lot to be confident about. However, European fund managers will need to be on their toes if they are to compete successfully against new products. Against tougher global competition. The industry cannot afford to be held back by fragmented markets or outdated regulation. Nor can it afford to be burdened with the costs of a raft of new legislation unless the realistically assessed benefits that flow from it demonstrably exceed the costs of implementing it. Our Green Paper is about providing a regulatory environment which allows this business to grow itself on a pan-European basis. So that it can play its full part in meeting the bigger challenges facing the European economy.