Recovery seen in Spain

After a prolonged period of outflows and a drop in investor sentiment, the Spanish asset management industry seems to be undergoing a period of recovery.

Spain’s asset management industry has faced multiple headwinds in
recent years: from macroeconomic drivers such as concerns about values
of domestic assets in the wake of the eurozone sovereign debt crisis, to the
affect of the country’s banking crisis on the ability of savers to actually
access investment services.

However, there has been increasing evidence of a recovery. For example, data released by Lipper, the data and research provider of Thomson Reuters, notes that in October 2013 Spain saw €2.2bn of net inflows to its fund industry, contributing to the overall €16.4bn net inflows in the European industry.

This result saw the country beat the United Kingdom (+€1.1bn) as a market, as well as France (+€0.7bn), and was a positive against the net outflows experienced by Portugal (-€0.3bn), Germany (-€0.2bn), and the Netherlands
(-€0.2bn). The results were even more encouraging if compared with previous years’ results.

At the end of 2012, the country’s fund industry saw negative net sales of some €10bn, while at the end of the period between January and October 2013 total net inflows were already some €15bn, almost €13bn of which came from bond
investments. Overall, the Spanish fund industry has experienced an increase in assets under management of nearly 23% through 2013 to October.

Views on recovery

Eduardo García Hidalgo, global CIO at BBVA Asset Management, notices that some of the strongest demand has been for longer maturities in fixed income, from investors who were chasing higher yields.

“That said, we have also witnessed strong inflows into multi-asset funds across the risk spectrum and not only at the less risky end as was the case in the past. Investor are increasingly aware that, in order to achieve the sort of returns they made in 2012 and 2013 on the back of the narrowing of Spanish government debt spreads, they need a higher exposure to risky assets,” he says.

Looking ahead through 2014, Hidalgo says that BBVA nevertheless remains somewhat positive on Spanish government debt.

“The recent change in the credit agencies’ outlook for the Kingdom of Spain reflects the improving fundamentals as well as the country’s ability to access the markets. The resulting lower volatility is likely to strengthen foreign demand given the still attractive yields, particularly in the longer maturities,” he explains.

As for equities, Hidalgo says he expects them to produce attractive returns over the next three to five years as profitability normalises. Ana Rivero, head of product and market intelligence at Santander Asset Management in Spain (below), confirms that after a critical period of continuing outflows and the search of financial ‘safe havens’ in the form of bank deposits, Spanish investors have come back to the funds industry in search of returns and performance.


However, as she points out, the difficult situation has propelled the launch of conservative funds with attractive expected returns such as target return funds, which have driven the interest of incomers in the industry.

“Thanks to their conservative nature, such fixed income portfolios have been best performers in terms of net sales in the Spanish industry in 2013. Nonetheless, we have also witnessed the return of inflows into equity products, as well as the sustainability of inflows into balanced portfolios.

“These movements correspond to the decrease of risk aversion that has followed the improvement of the Spanish economic perspectives, and thus, the good performance of the Spanish sovereign bond spread,” Rivero says.

Looking ahead at 2014, Rivero says that Santander expects equities to attract more inflows. “In 2014 we are forecasting some recovery in the Spanish economy that could drive equity inflows, once the pace of upward earnings
revisions starts and given the low interest rates environment. This last factor is key when trying to deliver solid performance and might be the biggest challenge next year, as we expect limited carry and an increase in bond outflows. Nevertheless, this is not only a Spanish challenge, but a wider European issue.”

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