Thu, Jun 29, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Survey confirms European investment managers are revising offerings and fees to remain competitive

Monday, December 19, 2011
Opalesque Industry Update — Europe’s intermediary distributors of investment funds — as well as their clients — can expect roll outs of new products and potentially lower fees as investment managers fight to attract and retain assets in a challenging global investment market.

The results of the Greenwich Associates 2011 European Intermediary Distribution study reveal that investment managers are feeling the need to revise their product offerings and, in some cases, their fee structures, in an effort to remain competitive and relevant to customers at a time when market volatility is driving fund outflows and prompting many retail investors to hold onto their cash. Greenwich Associates research among 248 intermediary distributors of investment funds — including private banks, fund of funds, insurance companies, independent financial advisors, and retail banks — reveal the following trends:

• Distributors expect to see increased asset flows into alternative and thematic funds. As the head of fund selection at one private bank put it: “We are still in a low-return environment so our proposal has to be interesting without creating too much optimism.”

• Some distributors are gearing up for a rapid pickup in exchange-traded fund (ETF) sales. Private banks have already embraced ETFs as an attractive element of wealth management solutions for their clients, and ETFs are gaining traction among other distributors as well. Retail banks in particular expect to see significant asset flows into ETFs.

• Competition for assets and the proliferation of competitively priced passive funds could lead to dramatic reductions in fees in active product — especially in core equities.

Strong Demand Expected for ETFs, Alternatives and Thematic Funds
ETFs have achieved traction across all intermediary channels and particularly among private banks, where 19.8% of third-party assets are now invested into ETFs. The results of the Greenwich Associates study suggest that ETF allocations are poised for future growth across all channels in coming years. European retail banks are gearing up for a significant increase in ETF sales, with current ETF allocations of 4.2% of third-party assets expected to jump to 12.1% by 2014.

“Investment managers are coming to market with new ETFs because these products align well with changes in customer preferences and demands, including a growing emphasis on costs and fees and a desire to gain specific desired exposures,” explains Greenwich Associates consultant Lydia Vitalis. “Regulatory changes, such as the Retail Distribution Review (RDR) seeking to ban commission in the U.K. retail market, will bring about changes in the distribution landscape that will likely increase interest in ETFs further.”

In general, the results of the 2011 study suggest that the biggest increases in product demand among retail investors in the next year will occur in thematic, specialist and alternative funds, including absolute return, commodities, new-style balanced or “diversified growth” funds, and ecological/green funds. Distributors also predict significant increases in allocations to international equities, both developed and, in particular, emerging markets.

What many of these products have in common is the opportunity to deliver growth in a generally low-return environment. Of course, these products can also deliver relatively high fees and attractive margins for fund distributors and managers — a fact that could color the future demand dynamic.

Fees: Compression Ahead
While many of the active funds now being sold through intermediary distribution channels carry fees in the 150 basis point range, some investment managers are coming to market with a range of low-cost core equity products with fees as low as 40 basis points. Investors’ increased focus on minimizing expenses and managers’ growing willingness to sell low-cost, beta-focused products suggest that additional fee compression is on the way. “We anticipate fees on core equity products to come down dramatically,” says Greenwich Associates consultant Marc Haynes.

Open Architecture Continues Its Steady Rise
The study results also reveal a continuation of the trend toward open architecture in spite of parental pressures to the contrary in the case of some distributors. The picture across Europe is quite varied as a consequence of regional variations in channel dominance. The U.K. stands out as the most “open” market with 81% of assets in third-party product, which is consistent with the prominence of the U.K.’s independent financial advisor (IFA) industry. In France, the reverse is true, with proprietary assets dominating fund distribution and only 29% of assets allocated to third-party product, although expectations are that this will grow to 44% of total assets within the next three years.

Press release

Greenwich Associates provides research-based strategy management services for financial professionals. Greenwich Associates’ studies provide benefits to the buyers and sellers of financial services in the form of benchmark information on best practices and market intelligence on overall trends. Based in Stamford, Connecticut, with additional offices in London, Toronto, Tokyo, and Singapore, the firm offers over 100 research-based consulting programs to more than 250 global financial services companies. www.greenwich.com

BG

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Legal - Bond market concerns could scuttle Paulson's Fannie-Freddie plan[more]

    From Bloomberg.com: A hedge fund proposal for freeing Fannie Mae and Freddie Mac from U.S. control is poised to face stiff opposition from investors who say it risks wrecking the mortgage-bond market. The Moelis & Co. blueprint, which firms including Paulson & Co. and Blackstone Group LP sponsored,

  2. Other Voices: Are your pricing policies and procedures for less liquid instruments adequate?[more]

    Komfie Manalo, Opalesque Asia: The unrelated position mismarking incidents that quickly precipitated the closures of both Visium Asset Management and Marinus Capital have been recent focal points for market participants, but regulatory scrutiny of valuation choices for less liquid instruments is

  3. FinTech - AI hedge fund Numerai now live on Ethereum, Cryptocurrency hedge funds generate huge returns as bitcoin surges[more]

    AI hedge fund Numerai now live on Ethereum From Cryptoninjas.net: Back in February, Numerai announced numeraire (NMR), a cryptographic token to incentivize a new kind of hedge fund built by a network of data scientists. Earlier today, the Numeraire smart contract was officially deployed

  4. Investing - Advisors slash hedge fund positions, Theravance Biopharma is a top pick of investment guru Seth Klarman, As asset management industry grows a search for new revenue streams[more]

    Advisors slash hedge fund positions From Barrons.com: Financial advisors have cut wealthy clients' exposure to hedge funds by up to one third over the past 12 months, The Financial Times reports. Advisor firms in the FT's annual top-300 ranking have reduced their hedge fund allocation to

  5. Investing - U.S. hedge fund in anonymous bet against Tesco shares, Hedge funds made repeated attempts to invest in Veneto banks, Steve Cohen's Point72 takes stake in struggling electronics retailer Conn's, Hedge fund Excalibur bets Riksbank will tighten by end of year[more]

    U.S. hedge fund in anonymous bet against Tesco shares From FT.com: A $20bn New York hedge fund is using an offshore shell company to anonymously bet against the shares of the UK supermarket Tesco, raising fresh questions over the efficacy of European short selling disclosure rules.