The EU has a framework in place to establish a single market for investment funds across EU borders, and to ensure that EU citizens’ investments are protected. But not all of its ambitious goals have been achieved, says the European Court of Auditors in a special report published today, and many potential benefits for investors remain untapped. The objective of a true single market for investment funds has not been met, and cross-border activities remain rare. Funds are still not supervised consistently across all Member States, investor protection remains weak, and systemic risks are not adequately monitored.

Investment funds play a key role in the European capital markets union, helping investors to allocate their capital efficiently. In 2020, investment funds across the EU held almost €19 trillion in assets. Almost 70% of the EU funds market is still concentrated in just four Member States: Luxembourg, Ireland, Germany and France. To promote a healthy and productive investment fund industry and to protect investors, the EU has taken action and established a regulatory framework for investment funds to ensure that similar rules apply across the single market.

“The hope was that a more integrated investment-fund market would offer EU businesses more diverse sources of financing, and give investors better protection and wider choice”, said Rimantas Šadžius, the ECA member who led the audit. “But cross-border barriers remain, supervision standards still differ across the EU, and not all of the potential gains have been realised.”