Goldman Sachs AM applies the local touch
Goldman Sachs Asset Management (GSAM) registers its mutual funds throughout Europe, but it finds that a local touch is key when it comes to distributing and explaining them to clients.
Sheila Patel, co-chief executive officer of GSAM International, had been discussing investment strategies and relevant products with more than 100 investors in Geneva before sitting down with InvestmentEurope in London late last month.
“Our approach is very local in terms of serving clients,” she says.
“In the different marketplaces around Europe, we want to be sure to cater to them in an appropriate way. But, as far as registration of funds is concerned, we do this broadly in Europe.”
Most of the funds GSAM distributes via third parties in Europe are domiciled in Luxembourg. It uses a Sicav, called Goldman Sachs Funds, as a hub for fund distribution in the region.
Cross-border distribution seems to be the way forward for the industry, too.
Lipper’s analysis of European fund sales for last year found that €222.7bn (or 79% of all net sales) went to crossborder funds, which are defined as those that source less than 80% of assets from any one market.
At the end of January, GSAM’s Luxembourg Sicav had combined assets of $23.3bn across a range of different strategies in sub-funds.
Patel notes there are some “very specific constraints” in some cases for national registration, where each regulator can have different requirements that sometimes complicate the registration process. GSAM makes its Ucits-compliant funds available throughout Europe, as and where demand exists, by approaching national regulators for permission to distribute mutual funds locally.
The current registration process is set by the Ucits III rules.
Under this system, GSAM applies to each watchdog in turn for local distribution rights. But these rules are due to be streamlined in July this year under the Ucits IV rules. There, authorisation for local distribution rights is settled between national regulators.
Regardless of how the process works, Patel says, GSAM must still take into account distribution models and investor appetite in each individual country.
The global asset manager is wise to do so. Just as the eurozone’s member states have exhibited very different economic characteristics – not least over the past ten months – so too have their citizens shown themselves as heterogeneous when it comes to investing.
Last year, for example, the Swiss funnelled a net €3.9bn into Ucits bond funds while putting only €103m into balanced funds, according to the European Fund and Asset Management Association (EFAMA). At the same time, the French were adding a net €3.9bn to balanced funds while pulling €500m from bond funds. The Germans had an appetite for Ucits equity funds (€2.5bn net inflows), but far more hunger for balanced portfolios (€8.3bn) and far less for bond products (€585m).
Patel says: “We have to focus on service efforts to fit the way various markets work and how they are structured.”
So in Germany, for example, GSAM’s primary partnerships are with the major banks that are the largest channel of product to ‘retail investors’, broadly defined. In the more fragmented UK market, by contrast, it partners with a handful of wealth managers, private banks and family offices to give their clients access to its product suite.
Patel says: “You have to ensure you understand the needs of local networks in Europe and provide them with support.”
To do this, GSAM boosted its front-line sales staff there by more than 50% in EMEA since mid-2009, when it embarked on a global expansion programme. It is already Europe’s largest sub-adviser to third parties, eclipsing rivals with higher profile own-brand products and shorter track records in the continent.