Speaking at its Lipper Alpha Expert Forum this week (12 November), Detlef Glow told delegates that despite the declining number of fund launches, the different kinds of products coming to market indicated decent levels of innovation.
“There is a lot of innovation, from these ‘all weather’ bond funds, alternative UCITS to develop income streams, looking at the multi-asset space things are getting more complex – even the marketing terms are getting more complex such as the trend for multi-asset absolute return, and in the passive space we have the rise of smart beta, which is now very important.”
While fewer new launches happened, levels of annual liquidation and fund mergers have remained more or less stable since 2008, with the exception of this year to date.
Glow said he anticipated a few more closures in the final quarter of 2015, as many funds reached their target maturities.
Year on year since 2008, levels of assets under management (AUM) have grown consistently. European mutual fund market share is currently split 37% in equities, 25% in bonds, 15% in mixed, or multi-asset, 13% in money markets and 6% in alternative UCITS.
With 284 fund launches this year, 133 liquidations and 150 mergers, mixed asset was the only asset class showing net new products – by a factor of one. It looks set to be the biggest selling asset class of 2015, which Thomson Reuters Lipper said was the first time since it had been publishing its flow statistics.
While overall AUM is rising, the number of funds is shrinking, which Glow said was not necessarily a bad thing.
“We used to have a large number of funds with very low levels of AUM – a fraction of the average AUM seen in the US. But not concentration is being driving by profitability issues and company mergers.”
With fund groups under margin pressures, mergers where similar strategies are being run in tandem will see consolidation, and funds where profitability might be a concern are being wound up.
He said this was especially the case with insurance company or bank-owned asset managers, where the overall profit margin of a fund range could be dragged down by individual products.
The data showed a huge increase in demand for multi-asset products over the past three years, with further growing appetite for alternative UCITS also coming through.
“There is now a huge interest in these kinds of products in European markets,” he said.
“And that was not really to be expected because, generally, on the continent, investors are resistant to hedge funds, seeing them as the ‘bad side’ of the industry.
They are still reluctant but are seeking alternatives to gather the income they need with assets that are not correlated with either equities or bond markets. So they go into alternatives and reserve some of their risk budget for the other asset classes.”
