Funds Hub

Money managers under the microscope

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A new song has emerged in the European funds industry, born in the midst of the financial crisis. It is called “let’s all do a Carmignac”. It may not be quite as catchy as the Conga, and maybe not quite as much fun, but it has certainly gained a number of followers.

The fund performance and distribution strategy at Paris-based Carmignac warrant more column inches than are available here. But more broadly, it is well worth looking at some of the numbers that have led others to dance to its historically-unfashionable tune of mixed asset, balanced investing, as well as examining wider industry activity to see what insights can be gleaned.

The largest mutual fund in Europe – Carmignac Patrimoine – has generated net sales of around 10 billion euros ($14.05 billion) in each of the past two years. In both of these years this one fund attracted more than 50 percent of all sales activity across Europe (including those funds suffering redemptions) in its Mixed Assets sector. And even if only those funds generating inflows are compared, the fund drew in around 30 percent of sales in the sector.

Not only has this fund hoovered up huge quantities of investors’ money, but it has happened at a time when other, apparently similar, funds have been largely out of favour. Patrimoine’s ability to generate positive returns in recent dramatic market downturns is clearly crucial in attracting this level of loyalty, particularly as it is not from the new breed of unconstrained ‘absolute return’ funds. It has put its relative success down to well-timed overweight allocations to emerging markets.

Gerard Fitzpatrick: Positive on global growth

Guest blogger Gerard Fitzpatrick is portfolio manager at Russell Investments, where he runs a $5 billion global bond fund.

The views expressed here are entirely the author’s own and do not constitute Reuters point of view.

Morning Line-Up: Turning the tide or washed out by tsunami

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News and views on the asset management industry from Reuters and elsewhere:

Computer driven funds hit in Japan fallout – Financial Times

Aberdeen inflows turn positive in 2011 - Reuters

Dreyfus launches emerging market fund - Wall Street Journal

 

 

SRI can find strength through unity

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14:13 21Mar11 -COLUMN-SRI: From fashion accessory to industry staple By Detlef Glow, Head of EMEA Research at Lipper. The views expressed are his own. FRANKFURT, March 21 (Reuters) – Sustainable investment, socially-responsible investment (SRI) and environmental, social, governance (ESG) approaches have been hot topics in the funds industry for what seems like a very long time. Hot, but not boiling. One aspect which serves to cool it all down is that the steadily increasing popularity of such investments has prompted portfolio managers to try and differentiate themselves by applying a host of slightly different parameters for their analysis or using different names for their investment approach. It doesn’t help that the broad sector itself can be referred to in a host of ways too: Ethical? ESG? SRI? Sustainable? This has created an expanding jungle of acronyms and names used within the industry, as well as an expanding collection of confused private investors, portfolio manager, analysts, journalists and other professionals. A number of studies have confirmed that investors are struggling to make informed decisions as they attempt to build a coherent sustainable investment strategy. In February 2009, a study by Union Investment asked 256 professional investors about their knowledge, preferences and perspectives regarding this arm of the industry. The main outcome was this: “Everyone is talking about sustainable asset management but as of yet it has not become firmly anchored in many portfolios of institutional investors such as banks, insurance companies and major corporations.” Nevertheless, the European investment industry has tried in the recent past to attract fresh money by launching new active managed sustainability funds in emerging markets or linked to hot topics like green energy. There are also new exchange traded funds (ETFs) which track indices based on sustainable or ethical selection criteria. Even if some of these developments have been driven by fashions in investment trends, these new products are in general a move in the right direction; investors do now have more choices to integrate SRI/ESG strategies into their portfolios. However, it will take more than just a few new funds to drive the development of sustainable investments further. MAINSTREAM From my point of view, one of the most interesting questions to ponder is why, if everybody wants to invest in a more sustainable way, do the vast majority of asset managers not use sustainable selection criteria within their mainstream investment processes? One reason could be the relative lack of information on the impact of these strategies in terms of performance and costs to their portfolios. On the other hand, there are a number of SRI/ESG strategies which have proven their ability to add value to regular investment management approaches. Asset managers also raise the point that they don’t want to lose investment opportunities by placing restrictions on industry sectors which may impact their ability to generate alpha. This issue could be fixed by using a best-in-class approach which allows the portfolio manager to invest in the most sustainable companies from all industry sectors. But from my perspective, it does not make sense to implement a sustainable investment approach which allows the fund manager to invest in harmful or unsustainable industry sectors. There are already a number of asset managers, after all, who have successfully integrated sustainability selection criteria into their mainstream portfolios, and which do not look like they are facing issues on this. There are obstacles, certainly, but there is also a clear route to take sustainable investment strategies from a periodically fashionable niche into a broad and commonly-used investment strategy — and it involves tackling that jungle of divergent approaches which has marked the industry’s evolution. Most studies looking at investors’ views on socially- responsible investment indicate that there is a lack of transparency which stops institutional as well as private investors from implementing SRI criteria in their portfolios. That implies that the biggest challenges for the industry are to educate clients and prospective clients, and also to focus on the development of common standards for SRI/ESG through associations like social investment forums (SIF) or multinational organizations like the UN-PRI. See http://www.unpri.org/ Combine this commonality of approach with transparent products and you will attract new assets from investors who are still sceptical of the setup and selection criteria used for funds and uncertain about the evaluation methods which are applied to allocations in their portfolios. (Editing by Joel Dimmock) ((detlef.glow@thomsonreuters.com; +49-69-7565-3518)) Keywords: COLUMN/LIPPER Monday, 21 March 2011 14:13:41RTRS [nLDE72K0EU] {C}ENDS

By Detlef Glow, Head of EMEA Research at Lipper. The views expressed are his own.

Sustainable investment, socially-responsible investment (SRI) and environmental, social, governance (ESG) approaches have been hot topics in the funds industry for what seems like a very long time. Hot, but not boiling.

Lipper: Fighting fragmentation

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By Merieme Boutayeb, Research Analyst at Lipper. The views expressed are her own.

The European investment funds industry has been reshaped over the last 25 years by EU directives designed to improve efficiency, strengthen competitiveness and boost distribution. However, the latest battle to reduce fragmentation of the industry is looking like a hard one to win.

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