Jyske punches above its weight
Denmark’s Jyske Bank is seeking to maintain a high rate of growth in its external fund selection activities
There has been a healthy growth in assets allocated to external funds at Denmark’s Jyske Bank, according to Kenneth Styrbæk, a manager selection analyst at the bank.
From nowhere some four years ago, assets managed externally are now at about the $1bn mark, as against some $6bn in value managed internally. This has occurred against a backdrop of a distinctive split between the bank’s operations targeting domestic Danish customers – predominantly retail and SME – and the international operations targeting international private banking clients.
The relatively recent development of the externally managed funds business came about because of a number of key reasons, Styrbæk says. One was the realisation during 2008 and thereafter of the need for a process of diversification. It also came about because a number of institutional clients demanded more than just a single supplier of funds.
“So, it is seen as a natural development in any case, but speeded up by the crisis,” he says.
Active funds focus
Styrbæk and colleagues seek active funds predominantly.
“Since we believe active managers can make substantial differences in many markets, this is unlikely to change. How we use ETFs is primarily for tactical plays. That could be on a regional, country or sector basis,” he says.
“When we give a mandate through a global equity manager, for example, we believe they can do this over the long term. But we also need the freedom to do some tactical plays. It could be we have a positive view of Germany and want to go with that in our total portfolio, and we will look to do that in the cheapest possible way.”
Sourcing new funds to consider as part of the selection process very much involves working with the bank’s own asset allocation team, and tools or services such as Morningstar Direct and Bloomberg.
“We do that to find the characteristics of the different types of investments to be used, and to have the best possible starting point for our selection process. We are aware that we could get a broader coverage by submitting RFPs to some of the platforms, but we prefer to work with strategies that are already available in Ucits format, and shown in our database, simply to have shorter time to market.”
Styrbæk adds that this is perhaps a consequence of not being the largest bank in the Nordics: “We have to be aware of the amount of money we can bring to the table. So we feel that this is a good way of doing it.”
Jyske Bank has opted for guided architecture, working with a select number of strategic partners, he explains.
“When we combine them, we should be able to provide a broad set of strong products. That’s how we look at it, he says. “We select the best products from those providers and combine them to cover all our main allocation asset classes. It may well mean we use products that are not number one in a quant screen, but they will always top the peer group. It is important to have long-term relationships with managers and avoid last-minute turnover.”
The structure ensures good access to managers when needed. Gaps in their capabilities would lead to ad hoc searches for specialist managers. There is also a fiscal regime challenge, which means it is difficult for foreign fund providers to compete in the Danish market. Any international provider would “probably have to be packaged in a Danish format”, Styrbæk says.
“If we’re looking for a specialist manager, we like to know that the entire business is built around that strategy. There should be the necessary resources around it, and a dedicated and competent manager to support it. It’s not enough to have a brilliant manager if he doesn’t have the right people to execute his trades, or doesn’t have the research he needs.”
Jyske Bank at a glance
• Founded in 1967, Jyske Bank is the third-largest bank in the Danish market – the second-largest Danish owned – with a particular focus on retail customers and SMEs.
• Outside Denmark it has a business customer branch in Hamburg, as well as a presence in Zurich, Gibraltar, Cannes, Copenhagen and Weert offering advisory services to private clients.
• The bank restricts single shareholders to a maximum of 2,000 votes to ensure continued independence.