Tue, Oct 13, 2015
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


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. Manager Profile - Pimco alternative funds flourish as 30-year bond rally fades[more]

    From Bloomberg.com: Inside Pacific Investment Management Co., the bond behemoth that lost two chief investment officers last year and saw almost $500 billion of client money leave, a hidden profit engine is easing some of the pain. For more than a decade, Newport Beach, California-based Pimco has qu

  2. Niche Investing - Art investment funds: Attracting institutional and other new investors[more]

    From Mondaq.com: The Deloitte/ArtTactic Art and Finance Report 2014 (the "Art and Finance Report") noted that the "global art investment fund market was estimated to be worth at least $1.26 billion in the first half of 2014." This seems almost inconsequential when juxtaposed with the $54 billion of

  3. Other Voices: Why fund boards must develop a response to cyber security and financial crime threats[more]

    This article was written by Carne, an international specialist in the provision of independent governance services and European management company solutions to the global asset management industry. A recent SEC action has highlighted how concerned regulators have become about data intru

  4. Hedge fund Barnegat survives September’s market selloff[more]

    Komfie Manalo, Opalesque Asia: Bob Treue’s $679 million Barnegat Fund proved resilient after another month of market letdown as the hedge fund gained 2.2% last month, bringing its year-to-date gains to 2.8%. Treue said in his monthly report to i

  5. …And Finally - Japanese men want upgrade on their virtual girlfriends[more]

    From Newsoftheweird.com: Five years after News of the Weird mentioned it, Japan's Love Plus virtual-girlfriend app is more popular than ever, serving a growing segment of the country's lonely males -- those beyond peak marital years and resigned to artificial "relationships." Love Plus models (Rinko