The EMEA sub-advised funds sector has seen overall growth in Q3 of EUR7.6 billion (+1.7 per cent) with 44 per cent of mandates experiencing above-average growth.
Private Bank-affiliated and Asset Management sponsor channels record the largest growth at 6.9 per cent and 3.7 per cent, respectively.
Among these are Swiss private banks LGT and Lombard Odier, the asset management unit of consultant Mercer as well as Italian sponsors EuroMobiliare and Fideuram. The latter two having awarded new mandates worth several hundred million Euro to Lord Abbett and Aberdeen in newly launched and previously inhouse managed funds.
Andreas Pfunder, Founder and CEO of instiHub, the data provider, says: “Private Bank-affiliated asset managers keep expanding their inhouse fund ranges to offer their clients exclusive solutions in a sub-advised fund wrapper. This way they can scale investors’ core allocations while better controlling the investment outcome.”
Liquid Alternative funds have seen 19.3 per cent YTD AuM growth. Against the universe’s 6.1 per cent YTD growth this is a stellar trend for this 5.4 per cent market share niche that includes long/short UCITS funds.
instiHub thinks that traditional managers of absolute return funds should pay attention as liquid alts can be marketed in a similar way and offer a fresh and differentiated sales story for distributors.
Pfunder says: “Twenty per cent of the 112 sponsors in our database have delegated the management of 93 liquid alternative funds to over a hundred managers. New products are being launched not only by dedicated alternative platforms but by more mainstream managers and distributors such as Generali’s BG Fund Management, and Azimut. We recorded eight new sub-advisers entering the European sub-advisory scene for the first time. Half of these hired for their alternative skills.”
He adds that growth has been particularly strong in fixed income – the anchor of many absolute return funds.
The Bank Distributor-affiliated sponsor channel continues to lose AuM. While the top five, adding EUR1.1 billion during Q3, retained focus on distributing sub-advised in-house products, the bottom five’s vertically integrated distributors preferred selling third party funds. Some large wealth managers have also adopted this lucrative approach.
Pfunder says: “Since the beginning of this year and with accelerating speed, they make hay while the sun shines ahead of MiFID II implementation which will make third party distribution more restrictive, burdensome and costly. Come the New Year I expect a shift in focus to in-house branded products, including those that are sub-advised.”
There are signs that a number of sponsors vertically integrated with distributors are readying themselves by having products that deliver better on expected outcome.
Pfunder says: “Our data tells us that some passive managers inside funds marketed as active are being switched. Also, there have been incidents where sub-advisers were able to replace incumbents for large tickets because they can actually fulfil the stated investment objective of a fund, for example a specific style.”
One beneficiary is T Rowe Price, the most successful sub-adviser in terms of Q3 wins, adding EUR1.2 billion through two new mandates.
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