Goldman Sachs AM applies the local touch

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Goldman Sachs Asset Management (GSAM) registers its mutual funds throughout Europe, but it finds that a local touch is key when it comes to distributing and explaining them to clients.

Focus on dialogue

GSAM has been present in Europe since 1991. Patel says it has signaled the importance of the region to its future by basing its chairman Jim O’Neill, previously the bank’s chief economist, in its EMEA head office in London rather than in New York.

Patel adds that its key European clients see and hear O’Neill, herself and portfolio managers in person at regular local events. There are also regular phone conferences, which together form one part of a range of client gatherings (see below).

Patel says: “There is a hunger for knowledge, and people are very open to hearing opinions from asset managers such as us, because they have been in a state of flux since the financial crisis and are deciding where to go in the future. Therefore, it is also our job to come back to them with ideas that are appropriate and can be implemented.”

GSAM benefits from doing this, too. Patel says: “We try to hold events on a regional basis, because we feel if advisers within a network can see, hear and understand what our management team is thinking, there is a better chance our products will fit into a portfolio at the right time.”

Patel’s unit can also harvest information on appetite for various asset classes and risk-taking from the personal contact.

She adds: “The events generate a constant feedback loop, which is also why we need people on the ground. They have given us a good sense of people’s willingness to start opening their minds to equities again, and to think about the opportunity set there.”

Despite nuances in individual countries, Patel notes that there is some common ground across Europe: “European investors are making their considerations within an overall asset allocation that is heavily weighted to fixed income, for example.”

She adds that the balance between fixed income and equities among Europeans “is tilting more slowly than people expected and, no matter what people may think from an adviser’s perspective and what views are espoused, the move takes time”.

GSAM’s discussions with clients about fixed income, however, are expanding more often now beyond developed world sovereigns and credit straight into unconstrained strategies and debt and corporate bonds in emerging markets (EM).

Patel says: “You need to make a decision tangible to an end-client and explain the end consequences – the potential range of outcomes – of the decisions they take. It is not always the case that fixed income is safer and conservative, nor that having more equities is riskier.”

With ten-year Bunds yielding 3.2% and equivalent Treasuries 3.4%, Patel says, “The quest for yield is ongoing, and when you look at how people’s portfolios are built now and project that into the future, it does not feel like the quest will slow down.

“Unconstrained fixed income has been a topic in a lot of countries around Europe. It is a broader approach than just focusing on quality high yield or quality government bonds, to pick from a broader range of assets in a single vehicle. EM debt [EMD] is a key component for a strategy-seeking yield in a difficult environment.”

But include EMD in a portfolio and one can also face local currency issues, so this also needs teasing out with advisers, according to Patel.

“Europeans are already thinking more about FX as well, asking what they should do about the US dollar and local currency,” she says.

“And they may have a very different opinion on the euro – their basecurrency – than someone sitting in the UK or Middle East, for example.”