Stockholm-based Jim Rotsman, Skandia‘s head of Nordic Investment Management talks about the context of the local market for funds given Skandia’s global approach to fund selection via its 4P system.
Although the 4P process identifies what Skandia considers good funds in all categories, it is the customers who decide for the most part where their money is invested, he adds.
One reason they may be keen to have such a high exposure to emerging markets is the long-term returns they have experienced.
However, Skandia can also tell through the analysis of how its platform is used to what extent – if there is a sharp fall in emerging markets assets – investors seek out other assets, such as fixed interest. Rotsman describes this as tactical re-allocation rather than an overall run away from emerging markets. For example, after recent events in Japan there was a shift towards fixed interest.
But, most investors base their decisions on a combination of time and risk in deciding their core investments, plus they may execute some smaller changes around the fringes of their portfolios, he says. Some simply remain more active in their approach than the average noted across the platform.
Ideas for funds to consider adding to the platform may come from Skandia’s analysts, or from customer demands. Whatever the source of the original idea for a fund to add, among the key attributes the analysts will then look to include proof that the manager has shown the ability to produce returns. The 4P process is integral to this. It also gives an idea as to how well they may perform going forward, on the assumption that the process can strip out the effects of luck from their past performances. Key triggers for changing the presence of a fund on the platform would include a manager change. If the manager leaves, then Skandia will immediately seek a meeting with the management group and/or the new manager.
Hedge funds are on the platform, and there has been growing demand for these in recent years, Rotsman says. These are onshore Ucits hedge funds. “We try to give everything that the customer wants,” he says.
The issue of fund registration is not a clincher, he says. The 4P selection process will determine whether a fund is sufficiently good to be considered for the platform. As to whether it is, for example, a Dublin or Luxembourg-based fund is neither here nor there; customers do not ask about this, he says.
In terms of future trends, Rotsman says there have been increasing calls for mixed asset funds at the core of investors’ portfolios, which they then look to ‘spice up’ with other types, such as emerging markets or single country funds. This demand stretches to funds of funds.
Skandia does offer managed accounts, however it is studying the question to what extent it will increase support of managed accounts versus funds of funds on its platform. Some investors are likely to go over to FoFs from managed accounts, Rotsman says.