With some 5.4% of Europe’s total mutual fund and ETF net inflows already, the sub-advisory space represents one of the fastest growing opportunities for asset managers in the region, according to Cerulli Associates’ latest report into the dynamics of the European fund landscape.
The research and consultancy firm notes in European Distribution Dynamics 2018: Addressing a Shifting Landscape that the market already amounts so about €480bn, with Italy and the UK constituting the key markets in the region based on asset growth and number of new funds.
Cerulli estimates that the UK has a 37% market share, as well as being the location for the region’s biggest so called ‘sponsor’ St. James’s Place.
Italy has an estimated 15% market share, excluding sponsors headquartered in the US, and is the fastest growing sub-advisory market in the region. As a concept, it is less popular in markets such as Spain and Germany, where funds of funds are preferred, Cerulli adds.
The research has also identified some 1,290 funds sub-advised by third parties, with more than 100 sponsors – banks, financial adviser networks, consultants, institutions – outsourcing the management of their funds to sub-advisers. The market grew by 15% overall in 2016, and 16% in 2017. Yearly net inflows could be between €30-60bn over coming years, Cerulli predicts.
Angelos Gousios, director of European retail research at Cerulli and lead author of the report, said: “Fund providers and distributors need to work together more closely and share a greater volume of information to align solutions with the current needs of predefined targeted client segments.”
“At the same time, distributors and investors have to focus ever more on costs. However, this must not be at the expense of product quality; indeed, quality is becoming increasingly important.”
Closer cooperation is critical, not least because the part of the management fee that sponsors share with sub-advisers is “consistently lower than in the typical relationship”.
“Distributors can offer products with top-notch management, while protecting their profitability and reducing the cost to the customer,” Cerulli notes.
That said, those considering entering the market must recognise that it requires persistence and patience.
“Agreeing a sub-advisory deal is a long and onerous process. Lawyers, compliance teams, and other back-office functions need to be involved and it can take more than six months to reach an agreement. Managers need a solid operational team and must be willing to wait; they should not give up after just a couple of months,” Cerulli notes in its report. One of the upsides is that the money invested can be ‘stickier’ over time.
To read the full report click here: European Distribution Dynamics 2018
InvestmentEurope is hosting its Pan-European Sub-Advisory Summit on 4-5 October, 2018 at the Palazzo Parigi, Milan.
Groups currently committed to this two-day event – which will explore all facets of the fast developing sub-advisory market – include Columbia Threadneedle Investments, Goldman Sachs Asset Management, Invesco, Janus Henderson Investors, Pictet Asset Management, Pimco, Wellington, while there will also be insight from instiHub – the industry data provider.
For further details on the event and to register an interest in attending visit: http://www.investmenteurope.net/event/pan-european-sub-advisory-summit-milan-2018/