The European fund industry may be on the cusp of some much-needed consolidation as the number of fund launches on the continent started to slow throughout 2012.

Over the first six months of the year, 1,620 funds shut down while 1,104 were launched. Considering that the fund’s industry in Europe has seen a net rise of around 1,000 funds per year, these exits can be considered a sign of changing times.

Priorities within asset management firms are shifting and fewer fund launches could suggest groups are looking for stability. In the current environment, European asset managers are often hesitant to talk about growth, especially the face of investor uncertainty and risk aversion.

Recent studies conducted by CoreData Research UK find that fear underpins much of the current retail investor sentiment across continental Europe. People worry about the loss of money as a result of market volatility and, by and large, value stability over generating the return.

Against this backdrop, it is understandable that banks choose to focus on building deposits in favour of selling funds, as some have claimed they are doing. Several of the asset management strongholds in Europe are bank-owned and it is known that in times of strife, this part of the business tends to get sidelined in favour of the banks pushing for more deposits. This is especially true in times when consumers are anxious about preserving their wealth.

Although asset management being marginalised is not positive for the fund’s industry, the slowdown in fund launches should, in theory, be a constructive development. Earlier this year, CoreData’s Asset Manager Efficiency Report outlined some of the competing operational differences among groups active in the UK market and it stands to reason that launching funds entail a substantial cost burden which will impact the group’s efficiency.

Having fewer new funds being brought to market certainly helps staunch the fund flood seen in the past few years, but groups would also do well to consider the products they are already selling and think about rationalising them in a way that will best suit the market.

It is true that investors are worried and it is becoming more difficult to convince them to part with their hard-earned money to invest in fund products. However, instead of hunkering down and waiting for investor sentiment to improve, one can argue that asset managers would be better placed trying to show that not all fund products need to come with a hefty risk price attached.

The challenge remains for those owned by a bank is to show their parent company that this exercise is worth their while in the long term.