Industry Updates

Cerulli: Multi-asset investment strategies attract interest in Europe, but managers still cautious

Thursday, March 25, 2010

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Opalesque Industry Update - Interest in multi-asset investment strategies in Europe has never been higher, according to the new Cerulli Special Report: European Multi-Asset Investment Strategies. Total assets using a multi-asset approach stood at an estimated €848 billion (US$1,191 billion) as of 2009. Funds sourced from institutional investors account for €341 billion as of September 2009, based on Cerulli’s multi-asset manager survey conducted in January 2010, riding on the back of rising interest in fiduciary management and diversified growth funds. In the retail space, managers are seeing a resurrection of demand for new balanced funds that invest in a range of asset classes including alternatives. These flexible allocation funds registered a strong 5-year compound annual growth rate (CAGR) of 23.1% to reach €115 billion as of 2009. Cerulli estimates the 5-year CAGR to 2014 for the retail segment, including both traditional and new balanced funds, to stand at 8.0% or €746 billion.

“Multi-asset investments are most attractive to investors who lack resources for specialization as it is presented as a convenient, one-stop solution. Cerulli identifies the mass retail and affluent investors, the DC market, and small-to-medium sized pension funds as three key segments that possess the greatest asset gathering opportunities,” said Shiv Taneja, the managing director of Cerulli’s international practice.

Though the recent market meltdown created impetus for multi-asset strategies, an equally swift recovery would challenge its growth, because managers are cautious about the long-term viability of the approach. “Multi-asset investments tend to garner interest in every market downturn because of its flexibility and risk mitigation abilities, however the challenge is to ensure sustained demand especially when equity markets rally,” said senior analyst Yoon Ng, the report’s principal author.

Global fund managers are best positioned for the multi-asset business, because they can leverage existing scale and product offerings. However, skill and not scale is crucial to success, which means boutiques could do equally well by specializing in key asset allocation functions and outsourcing secondary roles. Across Europe, the U.K. holds the greatest opportunity for multi-asset gathering opportunities both in the retail and the institutional space. This is due to investors’ greater risk appetite and receptiveness to new products.

These findings and more are available in the latest Cerulli Special Report: European Multi-Asset Investment Strategies. - KM - Source

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