EM equities, debt leading asset classes – Fund Forum

Only a slim majority of seven leading asset managers involved in Europe have said the Eurozone’s debt crisis will be over in five years, but this did not stop all saying the region is still worth pursuing from the perspective of clients in the near-term.

On the day European Commission president José Manuel Barosso said “standing still was not an option” if the eurozone is to repair itself, seven executive-level asset managers involved in the region, speaking together at the Fund Forum in Monaco, said the crisis would not be over in three years. Three of the seven senior managers only said it would “maybe” be over by 2018.

Nevertheless, all the senior managers – from Investec, State Street Global Advisors, Principal Global Investors, Schroders, Franklin Templeton, Robeco and DWS – and 80% of the audience in a poll said it was worth pursuing Europe as a market for asset management over the coming three years.

But on the level of investment, forum delegates have voted emerging markets equities and debt as the two asset classes likely to perform best this year and next.

When asked about performance to 2013, over one quarter (28%) of the assembled mixture primarily of asset managers and fund buyers said EM equities would do best, followed by EM debt (18%) and global equity (12%). Funds of funds were put top by only 1% of the audience.

Hendrik du Toit, Investec’s CEO, said the crisis in a sense confirmed the need for his industry “to navigate risk through difficult times”.

The problems were a “risk in the short term” to the industry, in creating an environment of de-risking and banks building their balance sheets and deposits, said Schroders’ executive vice chairman Massimo Tosato, who added M&A was to be expected among asset managers. But the need to help provide pensions specifically as states increasingly withdraw from this role given the crisis created an opportunity, he added.

Jim McCaughan, Principal Global Investors CEO, said even though one part of the Eurozone was in recession, investors there still needed investment products. “But if you are only with a European client base and with European product, then your strategic thinking has not been very good in finding opportunities.”

Du Toit said the “home bias” in investing was coming home to haunt Europe, while Jamie Hammond, Franklin Templeton Europe CEO, said there were opportunities for his industry in “globalisation and the shift to global products and emerging markets [whereas] the threat to industry is more a political one”.

 

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