The €1bn club largely lacking in European funds, finds Fitch
Fewer than five of every 100 cross-border funds has more than €1bn in assets, according to analysis by Fitch Ratings that reveals how rarely Continental managers play in the €1bn club of large portfolios.
Of more than 12,000 products examined, only 430, or 3.5% of the total, exceeded €1bn in assets.
And of the largest 10 players with more than 25 cross-border funds, only one is on the Continent. The others are headquartered in the UK or US.
“These managers have benefited from their expertise in global products, emerging markets and fixed income, where flows have concentrated in the recent years, as well as their active cross border distribution strategy”, said Aymeric Poizot (pictured), managing director in Fitch’s fund and asset manager rating group.
Conversely, all but one of the 10 players with the largest ranges but smallest proportion of large flagships, are on mainland Europe.
Fitch said the fund ranges from mainland European players were more “fragmented…with few, if any, flagship funds”.
Poizot attributed this to these managers’ multiple captive distribution networks that prevented the development of large funds, a focus on domestic assets “where recent growth has been muted”, and managers having “weaker distribution strategies abroad”.
As exceptions to this rule, Poizot picked out specialist mainland European managers such as Skagen of Norway, Carmignac, DNCA, and Comgest of France.
He said having ‘fewer but larger funds’ benefited groups by allowing more efficient administration, reporting, controls, and related support functions.
“Portfolio managers can also focus on fewer funds and spend less time on administrative and commercial tasks, allowing them to spend more time on portfolio management. Commercially, flagship funds are also more visible, can accommodate bigger investor tickets and serve more easily as benchmarks when fund managers promote their portfolio management.”
However, dangers of relying too heavily on few, large funds included companies resting on “a one track record, management team or even star manager. Should the asset class or investment strategy fall out of favour or the lead manager leave, the company is exposed to greater business risk.
“Nevertheless, investors tend to view this reliance positive as in practice it involves a stronger commitment and increased attention from the management company.”