THE CERULLI REPORT. European Fund Selector 2014 Decoding the Buying Process LOOK INSIDE TO PURCHASE. Overview. Benefits. Subscription Information

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1 THE CERULLI REPORT European Fund Selector 2014 Decoding the Buying Process Overview This report examines Europe s gatekeepers, looking at what drives fund selection, the key criteria for selection, and how selection teams are changing. It explores centralization of teams and businesses, identifies the effects on manager and fund research, and provides insight into how asset managers can best navigate changing dynamics. The six main European markets covered are: France, Germany, Italy, Spain, Switzerland, and the United Kingdom. The Cerulli Report 14 THE CERULLI REPORT LOOK INSIDE 11 pages of report content attached 183 pages, 139 exhibits Data in this report comes from two proprietary surveys of more than 100 European fund selectors and 28 cross-border asset managers. TO PURCHASE Benefits Analyze fund buyers selection and de-selection criteria Examine key relationships in the selection process Evaluate the impact of centralization on third-party fund selection Questions Answered 1. How much space is there on a fund selector s shelf? 2. What is the divergence between fund selectors top selection criteria and the importance attached to those criteria by asset managers? 3. How can asset managers reduce the risk of being deselected? 4. How stable is a fund selector s buy list? 5. Who are the key influencers in securing selection? 6. What impact do preferred partnerships have on an asset manager s business? 7. Which channels are European asset managers focusing on? CALL info@cerulli.com VISIT HAVE US CONTACT YOU: Subscription Information $15,000 ANNUAL Hardcopy Digital copy in color Unlimited online firm-wide access Exhibits in Excel Key findings Online access to 1 related report Analyst support Research Included with Subscription A subscription to this report remains active through 5/19/2015 and includes online access to the following related Cerulli research: European Fund Selector 2013: Standing Out In A Crowded Market

2 Table of Contents Expanded Table of Contents - Expanded Key Questions Answered...15 How much space is there on a fund selector s shelf?...15 What is the divergence between fund selectors top selection criteria and the importance attached to those criteria by asset managers?16 How can asset managers lessen the possibility of having a fund deselected?...17 How stable is a fund selectors buy list?...18 Who are the key influencers in securing selection?...19 What impact do preferred partnerships have on an asset manager s business?...20 Which channels do European asset managers prefer to pitch for selection?...21 Chapter 1: What Drives Fund Selection?...22 Exhibit Number of Funds on a European Fund Selector s Buy List by Channel, Exhibit European Private Banks Allocation to Mutual Funds, Exhibit Fund De-Selection Criteria: Spread Between European Asset Managers and Fund Selectors, Exhibit Key Influencers of Fund Selection, Exhibit Fund Manager Turnover by Domicile, Chapter 2: Securing Selection: Essential Criteria...30 Exhibit Fund Selection Criteria: Spread Between European Asset Managers and Fund Selectors, Exhibit Databases Used by European Fund Selectors, Exhibit Use of Fund Ratings, Europe, Exhibit Morningstar: A Better Alternative to Capping Fund Manager Bonuses, April Exhibit Asset Managers Greatest Challenges in Fund Promotion, Exhibit Asset Managers Preparedness for a Rise in Prudential Capital Requirements, Exhibit Impact on Remuneration Structure Following Regulatory Changes, Exhibit Most Difficult Selectors When Getting on the Buy List, Chapter 3: Securing Selection: Secondary Factors...41 Exhibit European Buy List Turnover, Exhibit European Equity Managers Home Market Bias, December Exhibit Fund Sectors with No Unique Products, Europe, Exhibit Asset Managers Views on the Reasons for Selection of Their Funds, Exhibit Asset Managers Views on Product Specialists, Exhibit Frequency of Unsolicited Manager Meetings, Europe, Exhibit Most Useful Events for European Fund Selectors, The Cerulli Report European Fund Selector 2014

3 Expanded Table of Contents Chapter 4: Centralization...51 Exhibit Swiss Fund Selectors Activities in Asia, Exhibit Asset Managers Approach to Improving Relationships with Private Banks, Exhibit Global Selection Teams vs. Independent Selection Teams, Europe, Exhibit European Fund Selector Respondents Responsibilities, Exhibit Fund Selection at Major Wealth Managers...58 Exhibit Synergies Between European Fund Selectors, Exhibit Unit-Linked Assets as a Percentage of Total Life Insurance Assets of the Top 10 European Insurance Markets, Exhibit Preferred Partnerships, Europe, Exhibit Asset Managers Main Area of Focus for Chapter 5: France...65 Exhibit French Mutual Funds Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, France, Exhibit Number of Funds on a French Fund Selector s Buy List, Exhibit Buy List Turnover, France, Exhibit Preferred Partnerships, France, Exhibit Outsourced Fund Selection Process, France, Exhibit Databases Used by French Selectors, Exhibit Use of Fund Ratings, France, Exhibit French Fund Selectors Selection Criteria, France, Exhibit French Fund Selectors De-Selection Criteria, France, Exhibit Fund Sectors with No Unique Products, France, Exhibit Prominent Brand Names in France, Exhibit Firms with Good Product Specialists, France, Exhibit Most Useful Events, France, Exhibit Frequency of Unsolicited Manager Meetings, France, Chapter 6: Germany...82 Exhibit German Mutual Funds Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, Germany, Exhibit Number of Funds on a German Fund Selector s Buy List, Exhibit Buy List Turnover, Germany, Exhibit Preferred Partnerships, Germany, Exhibit Databases Used by German Fund Selectors, Exhibit Use of Fund Ratings, Germany, Exhibit German Fund Selectors Selection Criteria, Exhibit German Fund Selectors De-Selection Criteria, Exhibit Fund Sectors with No Unique Products, Germany, Exhibit Prominent Brand Names in Germany, Exhibit Most Useful Events for German Fund Selectors, The Cerulli Report European Fund Selector

4 Table of Contents Expanded Chapter 7: Italy...96 Exhibit Italian Mutual Funds Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, Italy, Exhibit Number of Managers on an Italian Fund Selector s Buy List, Exhibit Number of Funds on an Italian Fund Selector s Buy List, Exhibit Buy List Turnover, Italy, Exhibit Preferred Partnerships, Italy, Exhibit Outsourced Fund Selection Process, Italy, Exhibit Databases Used by Italian Fund Selectors, Exhibit Use of Fund Ratings, Italy, Exhibit Italian Fund Selectors Selection Criteria, Italy, Exhibit Italian Fund Selectors De-Selection Criteria, Italy, Exhibit Italian Fund Selectors Fee Range, Exhibit Fund Sectors with No Unique Products, Italy, Exhibit Prominent Brand Names in Italy, Exhibit Most Useful Events for Italian Fund Selectors, Exhibit Frequency of Unsolicited Manager Meetings, Italy, Chapter 8: Spain Exhibit Spanish Mutual Funds Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, Spain, Exhibit Number of Managers on a Spanish Fund Selector s Buy List, Exhibit Number of Funds on a Spanish Fund Selector s Buy List, Exhibit Buy List Turnover, Spain, Exhibit Preferred Partnerships, Spain, Exhibit Outsourced Fund Selection Process, Spain, Exhibit Databases Used by Spanish Fund Selectors, Exhibit Use of Fund Ratings, Spain, Exhibit Spanish Fund Selectors Selection Criteria, Exhibit Spanish Fund Selectors De-Selection Criteria, Exhibit Fund Sectors with No Unique Products, Spain, Exhibit Prominent Brand Names in Spain, Exhibit Firms with Good Product Specialists, Spain, Exhibit Most Useful Events for Spanish Fund Selectors, Exhibit Frequency of Unsolicited Manager Meetings, Spain, Exhibit Influence of the Introduction of Omnibus Accounts on the Use of Spanish Funds, Chapter 9: Switzerland Exhibit Swiss Mutual Funds Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, Switzerland, Exhibit Number of Funds on a Swiss Fund Selector s Buy List, Exhibit Buy List Turnover, Switzerland, Exhibit Preferred Partnerships, Switzerland, The Cerulli Report European Fund Selector 2014

5 Expanded Table of Contents Exhibit Outsourced Fund Selection Process, Switzerland, Exhibit Databases Used by Swiss Fund Selectors, Exhibit Use of Fund Ratings, Switzerland, Exhibit Swiss Fund Selectors Selection Criteria, Exhibit Swiss Fund Selectors De-Selection Criteria, Exhibit Fund Sectors with No Unique Products, Switzerland, Exhibit Prominent Brand Names in Switzerland, Exhibit Firms with Good Product Specialists, Switzerland, Exhibit Most Useful Events for Swiss Fund Selectors, Exhibit Frequency of Unsolicited Manager Meetings, Switzerland, Chapter 10: United Kingdom Exhibit UK Mutual Fund Assets Under Management and Net New Flows, Exhibit Global Selection Teams vs. Independent Selection Teams, United Kingdom, Exhibit Number of Managers on a UK Fund Selector s Buy List, Exhibit Number of Funds on a UK Fund Selector s Buy List, Exhibit Buy List Turnover, United Kingdom, Exhibit Preferred Partnerships, United Kingdom, Exhibit Outsourced Fund Selection Process, United Kingdom, Exhibit Databases Used by UK Fund Selectors, Exhibit Use of Fund Ratings, United Kingdom, Exhibit UK Fund Selectors Selection Criteria, Exhibit UK Fund Selectors De-Selection Criteria, Exhibit Fund Sectors with No Unique Products, United Kingdom, Exhibit Prominent Brand Names in the United Kingdom, Exhibit Firms with Good Product Specialists, United Kingdom, Exhibit Most Useful Events, United Kingdom, Exhibit Frequency of Unsolicited Manager Meetings, United Kingdom, Appendix Exhibit A.01. Number of Managers on a European Fund Selector s Buy List by Channel, Exhibit A.02. Number of Funds on a European Fund Selector s Buy List by Channel, Exhibit A.03. Number of Managers on a European Fund Selector s Buy List by Channel, Exhibit A.04. European Fund Selectors De-Selection Criteria, Exhibit A.05. Asset Managers Views on Factors Effecting De-Selection, Exhibit A.06. European Fund Selectors Selection Criteria, Exhibit A.07. Asset Managers Views on Factors Effecting Selection, Exhibit A.08. Largest 20 European Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.09. Largest 20 French Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.10. Largest 20 German Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.11. Largest 20 Italian Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.12. Largest 20 Spanish Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.13. Largest 20 Swiss Unfettered Fund-of-Funds Managers by Assets Under Management, The Cerulli Report European Fund Selector

6 Table of Contents Expanded Exhibit A.14. Largest 20 UK Unfettered Fund-of-Funds Managers by Assets Under Management, Exhibit A.15. Largest 20 International Wealth Managers by Assets Under Management and Net New Money, Exhibit A.16. Largest 20 European Insurers by Net Earned Premiums, The Cerulli Report European Fund Selector 2014

7 Sample Section From: The Cerulli Report European Fund Selector 2014: Decoding the Buying Process

8 Chapter 2 Securing Selection: Essential Criteria Chapter 2 Securing Selection: Essential Criteria Despite asset managers continual protestations that they have an open door, transparency is a major concern for fund selectors. The best fund analyst/asset manager meetings are extensive on-site visits. Fund size and capacity limits are increasingly a part of a fund selector s process. It was Russell Investments who first coined the four p manager selection process: people, process, portfolio, and performance. Since the methodology was first built several decades ago the list of p s has grown a formalized fund selection team considers seven to nine elements. Many of the additions are subjective (which we will discuss in Chapter 3: Securing Selection: Secondary Factors), such as passion and perspective but the key tenets of selection remain the same: people, process, and performance. EXHIBIT 2.01: Fund Selection Criteria: Spread Between European Asset Managers and Fund Selectors, 2014 Source: Cerulli Associates Analyst Notes: Fund selectors were asked to rate their top criteria for fund selection from 1 to 5, where 1=Not important and 5=Most important. Asset managers were asked to rate, on the same scale, the relative importance of each criteria in getting a fund selected. Most important Not important Investment process Investment philosophy Fund performance Experience/ turnover of investment team Access to Timely, portfolio accurate, and manager deep fund data Fees Diversification Fund size of investor Fund features, e.g., regular Branding and base income payouts, marketing support multiple currency share classes Label key: Asset managers Bar key: Asset managers deem more important Fund selectors Fund selectors deem more important 30 The Cerulli Report European Fund Selector 2014

9 Chapter 9 Switzerland EXHIBIT 9.04 Buy List Turnover, Switzerland, 2014 Source: Cerulli Associates Analyst Note: Respondents were asked "Is your fund buy list turnover increasing?" 60% 50% 50.0% 40% 30% 20% 25.0% 33.3% 10% 8.3% 0% There is a long-term trend toward increased turnover Turnover has increased since the financial crisis Turnover has increased over the last year There is no trend 0.0% 0.0% 0.0% Turnover has decreased over the last year Turnover has decreased since the financial crisis There is a long-term trend toward decreased turnover Multimanagers have had to implement big asset allocation calls since the financial crisis resulting in increased buy list turnover. An increased level of interaction between asset allocation committees and fund selection units has driven a trend, visible among 50% of our respondents, of increased buy list turnover. Key Implication: For some Swiss fund selectors, long-term relationships no longer have the staying power they once had. Asset managers targeting the Swiss market should be cognizant that selection does not ensure a job for life. Conversely, this is opening up opportunities for asset managers: BlackRock, Neuberger Berman, Barings Asset Management, and Henderson Global Investors are managers that have increased of headcount in the market. 138 The Cerulli Report European Fund Selector 2014

10 Company Index Abante Asesores Aberdeen...39, 78, 146, 164 Allfunds Allianz Global Investors...94, 147 Artemis...52 AXA...95 Barings Bestinver...115, 128, 129 BlackRock...26, 47, 49, 138 Bloomberg...105, 123, 141, 159 BNP Paribas Capital International...38 Carmignac...39, 78, 144 Cartesio...115, 128 CFS Rating Credit Suisse...134, 135, 146 DeAWM...94 Deutsche Bank...94 Drescher & Cie...82 DWS...94 Ernst & Young...27 European Investment Consulting evestment...89 Factset...89, 123 Fidelity...47, 79 Fitch Flossbach von Storch...82, 87 Fundinfo GAM...39, 47 Gruppo Generali Gruppo Sanpaolo Hargreaves Lansdown Henderson...138, 146 IAMA Consulting Inverco Inversis Invesco...39, The Cerulli Report European Fund Selector 2014

11 Investec...39, 57 J.P. Morgan...47, 49, 90 Kieger Legg Mason...82 Lipper...11, 84, 89, 123, 141, 152, 158, 159 Lombard Odier Lyxor...52 M&G...47, 146, 164, 165 March Gestión...115, 128 Markov Processes International (MPI) Mefop Mercer...122, 123, 158, 159 Mirabaud Morgan Stanley...90 Morningstar...11, 27, 32, 34, 37, 38, 73, 89, 122, 123, 124, 141, 158, 159, 160 Neptune IM...29 Neuberger Berman Nutmeg...45, 150 Old Mutual...39 Pictet...133, 135, 146 Pimco...39, 47, 147 Pioneer Investments Popular RBC Capital Markets...39 Russell Investments...30, 42, 43 S&P Santander Sauren...83, 90 Schroders...49, 150, 164 Standard Life...45, 47, 48, 165 Swiss & Global Asset Management...135, 146 Swisscanto...135, 146 Towers Watson...89 UBS...90, 134, 135, 140, 146 Unicorp Unigestion Vanguard...25 Company Index The Cerulli Report European Fund Selector

12 Company Index Veritas Investment...25 Wellington...38 Western AM...82 Zürcher Kantonalbank The Cerulli Report European Fund Selector 2014