By Valentina Za MILAN, Jan 28 (Reuters) - Excessive regulation is hurting European financial markets and local fund managers, favouring the spread of passive investing dominated by large U.S. players,
BDL Chief Warns EU Regulations Are Harming Financial Markets
Impact of EU Regulations on Financial Markets
By Valentina Za
Concerns Over Passive Investing
MILAN, Jan 28 (Reuters) - Excessive regulation is hurting European financial markets and local fund managers, favouring the spread of passive investing dominated by large U.S. players, the head of French asset manager BDL Capital Management said on Wednesday.
Geopolitical Risks and Market Dynamics
Holding a media presentation in Milan where the opening slide featured a blue turkey with yellow stars carrying the European Union flag, BDL founder and Chief Executive Hughes Beuzelin called for Europe to rebuild its stock markets.
Public vs. Private Equity
"We're completely crazy in Europe ... We need to speak to regulators, their agenda is driving us into a wall," said the head of the firm which manages 3.5 billion euros ($4.2 billion) in assets, investing in public equities with an active strategy.
Beuzelin said index-tracking, or passive, funds had overtaken actively managed funds in U.S. equities, leading to what he argued was a poor allocation of investors' cash.
Given that passive funds track mainly U.S. or global indexes, in Europe's case the prevalence of passive investing amounts to exporting savings to fund U.S. companies, he warned.
With transatlantic relations fraying and geopolitical risks rising, the flow of EU savings into U.S. markets has become a key focus for the bloc's authorities.
A dearth of new share offerings and a wave of delistings have drained cash from European bourses, with higher liquidity and valuations encouraging companies to list in the Unites States.
"I think that public equity is better, not perfect, but everyone can invest in public equity while private equity is for the happy few. Private equity was good at the beginning but now there are too many funds ... and they are overpaying for the businesses they buy," Beuzelin said.
Passive investing channels money into assets whose prices are already rising, with investors attracted by what he called the "market momentum factor."
High valuations for European banks and the defence sector reflect this trend, he said, while sectors such as beverages sit at the opposite end of the spectrum.
($1 = 0.8361 euros)
(Reporting by Valentina Za, editing by Gavin Jones)
