Cerulli Associates has published its fifth European Distribution Dynamics report, which suggests that managers are set to increase their cross-border activities.
Among countries where cross-border managers plan to increase their sales efforts the most in 2015, Italy is targeted by 59.5% of the managers polled by Cerulli, up from 37% in 2014. It almost reaches the levels of managers’ intentions for the three main markets of Germany (67.6%), Switzerland (64.9%) and the United Kingdom (62.2%).
Managers also plan to strengthen significantly their presence in France at 43.2% against 22.2% in 2014, and in Spain at 27%, up from 18.5% last year.
Switzerland, the United Kingdom and Sweden face a drop in the share of cross-border managers planning to operate there in comparison with 2014.
Competition in Europe is stiff, Cerulli said; that is making asset managers become more strategic and root themselves in selected countries.
Cerulli highlights the example of Franklin Templeton, which has set up branches in Rome, Florence, Milan, and Padua, and posts between €800m and €1.5bn net inflows every quarter according to Assogestioni.
Barbara Wall, Cerulli’s Europe research director, commented : “This was a shrewd strategy that paid off.”
“Many foreign managers launched funds in Italy, trying to sell them, either from a distance or by opening a branch in Milan. But sales is a local game and success is more likely if a firm has people on the ground-and not just in Milan,” she added.
Cerulli finds out that by opening branches on target territory, managers can enhance understanding with distributors and is more effective than making regular presentations as part of a road trip.
Angelos Gousios, associate director with Cerulli in London and one of the authors of European Distribution Dynamics 2015: Preparing for a New Era, said: “In our talks with Italian wealth managers, they frequently say lack of time hinders their work. They do not have time to go to events. Having a branch down the road where they can pop in informally and discuss market developments over coffee is more attractive.”
Next step for cross-border managers will be “to expand more substantially in multiple markets”, according to the survey.
In its report, Cerulli also gives insights on single local markets, as the impact of low returns for money in the French market.
“Low returns for money market funds and euro-contract investments are gradually pushing French investors out of their liquid positions toward long term active products,” the firm pointed out.
Cerulli’s report describes French market as expensive but large. “Established cross-border managers with scale and blockbuster funds get the better deals”, it spots. Cerulli also highlights passive solutions being popular in France and that might benefit from upcoming local and pan-European regulation.
As for Germany, the study assesses the prospects for distribution.
“Fund selection centers on risk minimization and potential newcomers must adjust their message to make headway and striking a deal with key allies in Germany is the best insurance for a newcomer to the market”, said Cerulli.
Cerulli also spots a fast growth in the Spanish market, of which third party products are “benefitting the most”.
In Italy, “the launch of listed open-end funds paved the way for smaller/niche players” says the firm’s report.