CLUSTERING OF EU MEMBER STATES BY THE LEVEL OF DEVELOPMENT OF INSTITUTIONAL INVESTOR ASSET MANAGEMENT

Abstract

The financial landscape within the European Union is characterized by a significant disparity in the development of institutional investor asset management across its member states. Institutional investors, such as pension funds, insurance companies, and investment trusts, are vital in shaping financial markets and influencing economic stability. This study aims to fill the gap in the existing literature by examining the grouping of European Union member-states. The research focuses on examining key attributes, trends, and performance indicators of institutional investor asset management across various EU member-states. It utilizes data from 2017 to 2022, reflecting the average values of financial assets held by institutional investors as a percentage of Gross Domestic Product (GDP). This data provides a critical perspective on the investment landscape within the EU, particularly focusing on investment funds and insurance corporations. A notable observation from the data is the significant variance in the financial assets to GDP ratio among EU countries, with Denmark and France showing exceptionally high ratios, indicating a substantial role of institutional investments in their economies. In contrast, Lithuania and Greece demonstrate much lower ratios. This disparity is further analyzed through cluster analysis, grouping EU member-states into five clusters based on their asset management profiles. The clusters reveal distinct patterns in the distribution and development of asset management across the EU. Countries like Denmark and France, with highly developed financial markets, contrast sharply with those like Lithuania and Greece, which have less mature markets. The study highlights the influence of various factors such as economic structure, regulatory environment, and cultural attitudes towards savings and investment on these disparities. The study suggests that future research should focus on developing comprehensive policy recommendations, taking into consideration the distinct characteristics of each cluster to promote balanced economic growth and stability within the EU.