Since the global financial crisis there have been very few key markets and products which investors continue to seek comfort in. Many asset managers have suffered a lack of new “AUM” due to their existing lack of diverse products. Many institutional investors – insurers, pension funds, corporations, governments and other entities have put asset managers under scrutiny. The increased demand for transparency and increased risk management is becoming just as important as overall performance.
Institutional investors are seeking more customised solutions; they are probing into managers’ investment processes and philosophies and are questioning traditional performance benchmarks. More than ever, asset managers need to have a compelling investment proposition to continue to acquire an increased market share. Multi Manager investing has come a very long way and is now converging with Multi-Asset investing. As a result it has become more important to differentiate clearly between multi-manager and multi-asset propositions. In uncertain times, Investors have looked at Multi-Asset investing as a way of de-risking by taking a diverse approach to returns. Multi-Asset investing blends a wide range of assets to deliver the best risk-adjusted returns.
From a general worldwide Multi-Asset approach, investment firms are now launching dedicated global Emerging Market Multi-Asset funds. Several large global asset managers have been immensely successful in this asset class over the past 4 years.
We have seen significant movement of both individual portfolio managers and teams in the Global and Emerging Markets product space. Opportunities continue to grow in these investment categories in both large organizations and boutiques.
However, European asset managers, particularly the Benelux region, France, Italy, Portugal and Spain have seen investors switch assets from mutual funds to savings accounts. A recent McKinsey study has shown that European asset managers lack of new inflows has in reality been the loss of market share as both institutional and retail investors turn away from traditional asset managers and sought out broader pools of financial assets. In order to address this problem of eroding market share, European asset managers must make a concerted effort to improve their understanding of customer needs and devise more effective systems to control fund management costs. In effect the business model may have to change.
The challenge going forward will be to see where it goes. With the increased requirement of bank’s to raise their capital reserves under Basel III, some European asset managers are becoming more involved in capital raisings for companies and countries. In effect some asset managers are expanding into realms that were traditionally the purview of investment banks.
This trend may lead to the recruitment of individuals with a different skill set which is necessary to round out this foray into new business lines.
Facts and figures:
- During the last 12 months, we have seen a UK money manager buy a dedicated emerging market house in the USA to quickly bolster its international expansion, whilst another dedicated private Emerging Market Equity manager in the UK, has seen assets grow from $5bn four years ago to $30bn!