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Cerulli: European managers brush off emerging market debt woes

Wednesday, July 24, 2013
Opalesque Industry Update - With central bank statements dictating fund flows, traditionally risky strategies are laid bare. However, manager conviction in emerging market debt (EMD) strategies is not lost, according to the July edition of The Cerulli Edge - European Monthly Product Trends.

"The recent pummeling that EMD received has undoubtedly shaken some investors and the next few months could prove difficult for EMD managers," commented Barbara Wall, director at Cerulli Associates. "A clear philosophy is critical. Managers who ignore so-called hot money movements are those that will be selling in five years' time."

There is plenty of evidence to demonstrate sustained interest in EMD. At a Cerulli asset manager roundtable event 14% of the attendees said that EMD was likely to win the most mandates from sovereign wealth funds over the next 12 months. The majority (64%) said the same of alternatives, while 21% thought emerging market equities was a likely contender.

Yoon Ng, a Cerulli associate director, noted that of the top-10 funds by 2013 sales in EMD, four have associated their brand with the asset class. "Several significant soft closures from the likes of Aberdeen, First State, and Franklin Templeton have left a gap in the market that other groups are looking to fill," she added.

Other Findings:

• European providers have delisted a record 231 exchange-traded products (ETPs) in the first half of the year, with many issuers justifying the move as allowing them to better focus on liquidity. The growth of the ETP market over the past few years has resulted in too many similar or very small products; fund rationalization is the next logical step.
• Institutional investors and discretionary buyers have an appetite for new investment strategies, while looking to diversify their manager base. Cerulli believes that Swiss private banks and funds of funds in particular are going out of their way to find innovative strategies for their clients.
• Cross-border U.K.-domiciled funds garnered €1.5 billion (US$1.96 billion) of NNF in May, the second-largest figure after Luxembourg-domiciled funds. U.K. YTD sales amounted to €8.3 billion, making it the third top-selling market after Luxembourg and Ireland. To cement its position as a cross-border center, Ireland is targeting Asian managers to grow its non-European UCITS marketshare.

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