Vive la différence! Fund buying habits set to diverge in 2011
Last year, European fund buyers were fairly homogenous in their appetite – they wanted funds active in emerging
markets. This year, however, their tastes spread across the range of asset classes.
In 2010, funds whose entire – or major – focus was developing markets accounted for about €120bn, or 42% of Europe’s total €283.1bn net fund purchases.
Researcher Lipper predicts the emerging markets (EM) theme will persist early in 2011, but be overtaken later as greater hunger develops for absolute return strategies.
The growing diversity in appetite supports the contention from co-chief executive of Goldman Sachs Asset Management Sheila Patel that whatever the ‘average European investor’ buys, national nuances make it undesirable to adopt a uniform distribution approach.
Below, we detail what asset classes Europe’s allocators are looking to buy, and what managers are already selling.
Germany seems to be the exception that proves the rule of diversity. Joachim Faber, chief executive of Allianz Global Investors, says: “Emerging markets are where our clients want exposure now. Just buying home markets will be a problem going forward as it will prevent our clients from some of the world’s more exciting markets.”
Last year, German investors played it fairly safe. About 80% of their €10.4bn net buying of Ucits portfolios was of balanced funds, 24% was equities portfolios and 6% went to bond funds, Lipper said. Germans pulled money from money market funds, and the various categories termed ‘other’.
Hamid Parsa, director of sales and business development at Alceda Fund Management, says Germany has “conservative investors who tend to prefer fixed income strategies”.
But there is a thirst for developing markets this year, says $130bn allocator Pascal Botteron, global head of hedge and mutual funds and multi-manager investments at Deutsche Bank Private Wealth Management.
He says his clients responded positively to a recent education campaign on EMs. Botteron is seeking boutique EM managers to populate a fund of funds his unit is planning. Alternative managers should note German investors’ demands for transparency and liquidity, and be ready to run Ucits products or managed accounts.
Fund sellers in Germany, meanwhile, say allocators are showing greatest interest for emerging markets debt (EMD) and energy. Frontier markets are also on their buy list. Michael Steiner, Investec’s sales director for Germany, says “specialist capabilities” are popular.
He says funds using “full Ucits powers” and hedge funds should increase in popularity while enthusiasm for funds of hedge funds dwindles.