accelerando associates recently held a fund distribution seminar in London, highlighting market insights and challenges.
Mixed assets funds have drawn most European fund flows (31%) for the nine first months of 2015. This is one of many 2015 market trends Lipper’s head of EMEA Research Detlef Glow presented during an accelerando associates fund distribution seminar held in London on 11 November.
Following mixed assets funds, alternative and bond strategies’ shares in fund flows from January to September 2015 have respectively amounted to 25% and 23%.
“Classical mixed assets funds have been replaced by multiassets funds. Alternatives get launched. The industry is innovating,” Glow stressed, recalling that in the late 1990s nobody would have been invested in absolute return strategies.
Some 133 new funds have been launched on the mixed assets segment in 2014. However, accelerando associates argues the multi-assets boom will disappoint many investors, expecting few winners and several losers.
“A few funds are collecting the most,” surmised Philip Kalus, founder and managing director of accelerando associates. Patterns towards multi-assets are also very different, he underlined. German investors have shown big appetite for multi-assets funds with €14.83bn inflows recorded for the first nine months of 2015, while estimated net sales in Switzerland, which is usually not a multi-assets oriented market, have amounted to €2.76bn YTD in September (Broadridge figures).
Glow broke down a European fund market of roughly €8.7trn of assets under management as at 30 September 2015, according to Lipper data. Assets were invested as following: 37% in equity funds, 25% in bond funds, 15% in
mixed assets funds, 13% in money market funds, 6% in alternatives, 2% in real estate, 2% in other funds, less than 1% in commodity funds.
Commenting on launches, mergers and liquidationsof funds in the European industry, Glow emphasised the number of funds in the industry had been “shrinking year after year” since 2011 which he considers no bad thing. accelerando associates has observed considerable room for consolidation in the European fund market as it tallies 35,000 funds with an average size of €270m against 7,600 funds with an average size of €1.5bn in the US market.
Kalus depicted a crowded European market with too many funds and too little added value.
As at 30 September 2015, the three best selling sectors of the year were global bonds, mixed assets Europe/Global and European equities, and the three worst ones were Asia Pacific ex Japan equities, global emerging markets equities and US equities.
Data positions itself as a core ongoing challenge, Kalus and his team have found. For example, the consultant has found significant gaps between its estimates of market size and those published by local asset management industry associations.
For instance, in October 2014, accelerando associates estimated a Swiss market ‘size’ of CHF1.63trn against CHF806bn estimated by the local industry association. Such differences could lead to a “serious risk of very wrong
conclusions,” Kalus warned.
Management fees are another challenge. accelerando associates’ interviews with senior sales people suggests that premium brands can sell for a premium price.
However, it also discovered that while fund sellers were mostly expecting competition from existing peer group in France (over 65%) and Germany (over 60%), there is divergence on the question of which investor segment will drive most growth in the coming year. Over 60% of German sellers answered that institutional investors will be the key segment driving growth, against 40% of French sellers believing similarly.
French fund sellers are more confident in wholesale and retail growth than their German counterparts. Other industry challenges identified include a shift from open to guided architecture, growth in in-house asset management, costs rising and margins falling, and regulatory challenges led by Mifid II.