The past year's financial turmoil has intensified competition across Spain’s asset management industry as companies fight for a share of a diminishing wealth market, with both local and international asset managers under pressure.
Still it can be difficult for foreign players to reach new clients. "There are not many banks that actually sell foreign funds in their branches, they do give us access through funds of funds or discretionary portfolios some times," says Schroders' Bergareche.
Third party funds are generally handled through the private banking and the asset management divisions of the big financial institutions and may compete with the institution's own offering.
"If you are a good client of a big bank and you want to do something they will probably buy it for you, but they will not offer it to you," says Ignis' Lorán.
"The local banks provide asset allocation and they look to external providers in order to give the alpha generation in the different asset classes that they decide upon. And that's the winning [card] for foreign managers in Spain," he says. "It's not direct, it's through the asset allocators from a local firm."
Foreign managers only provide products which the allocators package together for their client. "I'm not selling to the client. The client has my fund because it's in the portfolio of funds that the asset allocator is selecting," says Lorán. Other factors come into play. Under new EU regulations, the banks must strengthen their capital. They need liquidity, but as they cannot raise finance on the international markets, they have been competing hard for deposits. This has had a big impact on the fund industry.
In June, the government set a limit on the interest rates banks can offer on deposits, but the banks responded by pushing promissory notes that pay between 3% and 3.75%, in addition to offering high rates deposits. These products compete directly for clients' savings.
The two sides have different strengths and need one another, says Bergareche. "I think we complement each other. Local (Spanish) asset management is concentrated on short-term fixed income, guaranteed products, mainly fixed income money market funds, most of the assets they have and their products are concentrated there. We offer much more value added products." These can include high yield emerging market debt and equities.
Local companies have expertise in the IBEX and Spanish equities. Some of them have some expertise in Europe and in Latin America because of the Spanish bank's presence there. But all agree that the crisis is sharpening competition across the industry, including for the banks, although they have an advantage due to their long-standing relationship with their clients.
"Financial wealth is not growing. There is not much activity so what people are doing is fighting for the same business. And to fight for the same business means offering the best service solutions. Clients are more careful and there is much more competition," Lorán says.