The recent results season for asset managers contained numerous hints that Europe is taking centre stage on the sales agenda.
Take the August 1 half-year results of Hyde Park Corner-based British stalwart Jupiter Fund Managers. “Net sales of Ucits funds across Europe showed significant strength in the first quarter,” they said.
“While we continue to believe that our core UK market offers significant long-term opportunities for growth, our international distribution efforts are becoming an increasingly important contributor to the group,” said chief executive Edward Bonham Carter.
Interim results from City-based giant Henderson Group on August 8 adopted a similar slant. “In Europe, our Sicavs, particularly European Corporate Bond, Global Property Equities and Global Technology, generated over £400m of net flows in the first half,” they said.
Behind the scenes, asset managers such as these have been concentrating an increasingly large share of their distribution resources in European markets.
Head of ‘EMEA’ – Europe, the Middle East and Africa – sales jobs have been established as the battle to get British asset management brands into the minds of European investors has hotted up.
And there are signs that the British invasion is taking hold. A recent survey of cross-border fund sales by Lipper revealed that, after suffering outflows in 2011, UK-based asset managers received cross-border inflows of ¤33.9bn in 2012 – the highest amount of any nation after the US.
Greg Jones, Henderson Group’s head of distribution for Europe, the Middle East, Asia and Latin America, says European distribution has been a major part of the firm’s plans for the future for some time.
He says he has seen inflows from the Continent surge from ¤3bn to ¤10bn since he joined the firm in December 2009, in spite of the fact the firm was once told that European investors “would never buy an Oeic” –the structure used for UK-based funds.
The group’s Credit Alpha and European Special Situations Oeic-structured funds have now both been registered for distribution in Europe and have euro-denominated share classes, he says.
But what is driving this very recent surge in focus across the Channel?
Mr Jones says the key is that investors tend to fixate on their domestic markets.
In recent years the aftermath of the global financial meltdown has sent the eurozone’s markets into severe falls, after several of the region’s ‘peripheral’ governments – such as Portugal and Greece – have teetered on the brink of insolvency.
That crisis brought the future of the single euro currency itself into question.
But European stockmarkets have rallied sharply in recent months, on the back of a promise from the region’s top central banker to do “whatever it takes” to protect the future of the single euro currency, which many took as a sign the crisis was resolved and markets were oversold. This turnaround in market sentiment has driven Europe’s fund investors, who – like most global investors – are naturally inclined to invest heavily in their home markets, to return to investing once again.
UK investors have remained relatively far more constant in their investing stance, owing to the fact that the UK stockmarket – their main investment – has not seen the kind of wild swings seen in Europe, but European clients have been in a buying frenzy.
Mr Jones says Henderson has expanded its range of Luxembourg-based Sicav funds to cater for European investors during this buying spree. Meanwhile, he says, the firm’s UK investors – still the vast majority of its customers – are now more of a “mature book of business”, particularly after its acquisitions of UK-focused asset managers New Star and Gartmore.
Jupiter Asset Management, has experienced a similar short-term burst of European sales. In the six months to June 30, the group reported an increase of 30 per cent in its Sicav range to £2.5bn, now making up just under 10 per cent of assets under management.
However, in addition to the short-term sales explosion in Europe fuelled by the market recovery there are deeper, more structural themes at play.
Some asset managers refer to the advent of the RDR in the UK as having generated a natural pause in domestic sales.
Steve Kenny, head of sales at City-based asset manager Kames Capital, says the firm uses its continental Europe business as a “natural hedge” against its UK one.
“If you fall out of favour in the UK, you still have potential in other markets,” he adds.
This trend of fund groups seeking to sell more funds in Europe has also coincided with demand from Europe-based distributors such as UBS and Credit Suisse for UK asset managers to make their funds available on the continent, Mr Kenny says.
“The domestic space is a very competitive market and there is a blossoming market in Europe,” Mr Kenny says.
He says Kames Capital is now looking to advance its presence in Europe.
“We have now got a reasonably sized European sales team and are going to do a lot of work on the European franchise to move forward,” says the sales chief.
While some UK fund managers are looking to Europe as their future, there also remain a handful of UK groups that are looking to consolidate already strong overseas positions.
UK giant Aberdeen Asset Management has a Luxembourg-domiciled Sicav range of more than £40bn, four times bigger than its UK Oeic range.
The funds are available for sale in more than 20 markets around the world, mainly Europe and the UK but also in countries such as Chile and Taiwan.
Neil Steedman, UK head of discretionary business development at the firm, says: “Just as in the UK, Aberdeen’s Asia Pacific and Emerging Market equity Luxembourg-domiciled funds have been particularly popular with European investors.”
Aberdeen is looking to open an office in Spain in the near future, and to strengthen teams in markets it sees as key, such as Germany, Italy, and Switzerland.
The progression of European fund brands into Europe is beyond doubt. But what has yet to be decided is – which of our brands will thrive and which will falter?
