Banks are likely to favour in-house funds post-MIFID II, because distribution inducements will still be permitted “in most markets”, according to InstiHub, the data provider to some €413bn of assets in the sub-advisory channel.
“We have to remember that retail bank affiliated sponsors of sub-advised funds compete against third party managers’ funds,” Andreas Pfunder, founder and CEO of instiHub, said, in the company’s latest quarterly quarterly market comment.
“It comes down to performance, differentiation and, that’s key, commercials.
“Distribution inducements can continue to be paid to banks after MIFID II implementation in most markets dominated by the channel. Banks’ preference for in-house products will therefore be driven by their built-in margins versus commissions from 3rd party asset managers.”
The trend for future sales in the sub-advisory space, where instiHub’s data covers more than 1,100 funds, is important given the growth rate being experienced by distributors and those such as wealth managers relying on access to funds to meet investment needs of their own clients.
instiHub’s data points to private bank sponsors growing assets by some 14% or $3.9bn – including $1.5bn from eight new fund launches over the second quarter this year. Wealth managers expanded by some $10bn in the quarter, especially by St James’s Place ($7bn) and UBS ($1bn).
Bank distributors grew 3.2% in dollar terms over the period, according to instiHub.
In terms of asset classes, the data suggests that specialist fixed income funds and European equity funds were the most attractive sectors over the quarter – for example some $2.6bn seen flowing into the latter. Themed equity funds also saw gains, particularly those from BNP Paribas/Parvest. However, US equity funds saw outflows as rotation continued, instiHub said.
“A number of sponsors have even closed their major equity market funds in Q2 as their solutions weren’t differentiated enough,” added Pfunder.