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 +1 617-437-0084 EMAIL info@cerulli.com VISIT www.cerulli.com HAVE US CONTACT YOU: http://clients.cerulli.com/tiny/aj1q 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
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 1.01. Number of Funds on a European Fund Selector s Buy List by Channel, 2014...22 Exhibit 1.02. European Private Banks Allocation to Mutual Funds, 2014...23 Exhibit 1.03. Fund De-Selection Criteria: Spread Between European Asset Managers and Fund Selectors, 2014...24 Exhibit 1.04. Key Influencers of Fund Selection, 2014...26 Exhibit 1.05. Fund Manager Turnover by Domicile, 2003 2013...28 Chapter 2: Securing Selection: Essential Criteria...30 Exhibit 2.01. Fund Selection Criteria: Spread Between European Asset Managers and Fund Selectors, 2014...30 Exhibit 2.02. Databases Used by European Fund Selectors, 2014...31 Exhibit 2.03. Use of Fund Ratings, Europe, 2014...32 Exhibit 2.04. Morningstar: A Better Alternative to Capping Fund Manager Bonuses, April 2013...33 Exhibit 2.05. Asset Managers Greatest Challenges in Fund Promotion, 2014...35 Exhibit 2.06. Asset Managers Preparedness for a Rise in Prudential Capital Requirements, 2013...36 Exhibit 2.07. Impact on Remuneration Structure Following Regulatory Changes, 2013...36 Exhibit 2.08. Most Difficult Selectors When Getting on the Buy List, 2014...37 Chapter 3: Securing Selection: Secondary Factors...41 Exhibit 3.01. European Buy List Turnover, 2014...41 Exhibit 3.02. European Equity Managers Home Market Bias, December 2013...43 Exhibit 3.03. Fund Sectors with No Unique Products, Europe, 2014...44 Exhibit 3.04. Asset Managers Views on the Reasons for Selection of Their Funds, 2014...45 Exhibit 3.05. Asset Managers Views on Product Specialists, 2014...47 Exhibit 3.06. Frequency of Unsolicited Manager Meetings, Europe, 2014...48 Exhibit 3.07. Most Useful Events for European Fund Selectors, 2014...49 6 The Cerulli Report European Fund Selector 2014
Expanded Table of Contents Chapter 4: Centralization...51 Exhibit 4.01. Swiss Fund Selectors Activities in Asia, 2014...53 Exhibit 4.02. Asset Managers Approach to Improving Relationships with Private Banks, 2014...54 Exhibit 4.03. Global Selection Teams vs. Independent Selection Teams, Europe, 2014...56 Exhibit 4.04. European Fund Selector Respondents Responsibilities, 2014...57 Exhibit 4.05. Fund Selection at Major Wealth Managers...58 Exhibit 4.06. Synergies Between European Fund Selectors, 2014...59 Exhibit 4.07. Unit-Linked Assets as a Percentage of Total Life Insurance Assets of the Top 10 European Insurance Markets, 2008 2012...61 Exhibit 4.08. Preferred Partnerships, Europe, 2014...62 Exhibit 4.09. Asset Managers Main Area of Focus for 2014...63 Chapter 5: France...65 Exhibit 5.01. French Mutual Funds Assets Under Management and Net New Flows, 2009 2013...67 Exhibit 5.02. Global Selection Teams vs. Independent Selection Teams, France, 2014...68 Exhibit 5.03. Number of Funds on a French Fund Selector s Buy List, 2014...69 Exhibit 5.04. Buy List Turnover, France, 2014...70 Exhibit 5.05. Preferred Partnerships, France, 2014...71 Exhibit 5.06. Outsourced Fund Selection Process, France, 2014...72 Exhibit 5.07. Databases Used by French Selectors, 2014...73 Exhibit 5.08. Use of Fund Ratings, France, 2014...74 Exhibit 5.09. French Fund Selectors Selection Criteria, France, 2014...75 Exhibit 5.10. French Fund Selectors De-Selection Criteria, France, 2014...76 Exhibit 5.11. Fund Sectors with No Unique Products, France, 2014...77 Exhibit 5.12. Prominent Brand Names in France, 2014...78 Exhibit 5.13. Firms with Good Product Specialists, France, 2014...79 Exhibit 5.14. Most Useful Events, France, 2014...80 Exhibit 5.15. Frequency of Unsolicited Manager Meetings, France, 2014...81 Chapter 6: Germany...82 Exhibit 6.01. German Mutual Funds Assets Under Management and Net New Flows, 2009 2013...84 Exhibit 6.02. Global Selection Teams vs. Independent Selection Teams, Germany, 2014...85 Exhibit 6.03. Number of Funds on a German Fund Selector s Buy List, 2014...86 Exhibit 6.04. Buy List Turnover, Germany, 2014...87 Exhibit 6.05. Preferred Partnerships, Germany, 2014...88 Exhibit 6.06. Databases Used by German Fund Selectors, 2014...89 Exhibit 6.07. Use of Fund Ratings, Germany, 2014...90 Exhibit 6.08. German Fund Selectors Selection Criteria, 2014...91 Exhibit 6.09. German Fund Selectors De-Selection Criteria, 2014...92 Exhibit 6.10. Fund Sectors with No Unique Products, Germany, 2014...93 Exhibit 6.11. Prominent Brand Names in Germany, 2014...94 Exhibit 6.12. Most Useful Events for German Fund Selectors, 2014...95 The Cerulli Report European Fund Selector 2014 7
Table of Contents Expanded Chapter 7: Italy...96 Exhibit 7.01. Italian Mutual Funds Assets Under Management and Net New Flows, 2009 2013...98 Exhibit 7.02. Global Selection Teams vs. Independent Selection Teams, Italy, 2014...99 Exhibit 7.03. Number of Managers on an Italian Fund Selector s Buy List, 2014...100 Exhibit 7.04. Number of Funds on an Italian Fund Selector s Buy List, 2014...101 Exhibit 7.05. Buy List Turnover, Italy, 2014...102 Exhibit 7.06. Preferred Partnerships, Italy, 2014...103 Exhibit 7.07. Outsourced Fund Selection Process, Italy, 2014...104 Exhibit 7.08. Databases Used by Italian Fund Selectors, 2014...105 Exhibit 7.09. Use of Fund Ratings, Italy, 2014...106 Exhibit 7.10. Italian Fund Selectors Selection Criteria, Italy, 2014...107 Exhibit 7.11. Italian Fund Selectors De-Selection Criteria, Italy, 2014...108 Exhibit 7.12. Italian Fund Selectors Fee Range, 2014...109 Exhibit 7.13. Fund Sectors with No Unique Products, Italy, 2014...110 Exhibit 7.14. Prominent Brand Names in Italy, 2014...111 Exhibit 7.15. Most Useful Events for Italian Fund Selectors, 2014...112 Exhibit 7.16. Frequency of Unsolicited Manager Meetings, Italy, 2014...113 Chapter 8: Spain...114 Exhibit 8.01. Spanish Mutual Funds Assets Under Management and Net New Flows, 2009 2013...116 Exhibit 8.02. Global Selection Teams vs. Independent Selection Teams, Spain, 2014...117 Exhibit 8.03. Number of Managers on a Spanish Fund Selector s Buy List, 2014...118 Exhibit 8.04. Number of Funds on a Spanish Fund Selector s Buy List, 2014...119 Exhibit 8.05. Buy List Turnover, Spain, 2014...120 Exhibit 8.06. Preferred Partnerships, Spain, 2014...121 Exhibit 8.07. Outsourced Fund Selection Process, Spain, 2014...122 Exhibit 8.08. Databases Used by Spanish Fund Selectors, 2014...123 Exhibit 8.09. Use of Fund Ratings, Spain, 2014...124 Exhibit 8.10. Spanish Fund Selectors Selection Criteria, 2014...125 Exhibit 8.11. Spanish Fund Selectors De-Selection Criteria, 2014...126 Exhibit 8.12. Fund Sectors with No Unique Products, Spain, 2014...127 Exhibit 8.13. Prominent Brand Names in Spain, 2014...128 Exhibit 8.14. Firms with Good Product Specialists, Spain, 2014...129 Exhibit 8.15. Most Useful Events for Spanish Fund Selectors, 2014...130 Exhibit 8.16. Frequency of Unsolicited Manager Meetings, Spain, 2014...131 Exhibit 8.17. Influence of the Introduction of Omnibus Accounts on the Use of Spanish Funds, 2014...132 Chapter 9: Switzerland...133 Exhibit 9.01. Swiss Mutual Funds Assets Under Management and Net New Flows, 2009 2013...135 Exhibit 9.02. Global Selection Teams vs. Independent Selection Teams, Switzerland, 2014...136 Exhibit 9.03. Number of Funds on a Swiss Fund Selector s Buy List, 2014...137 Exhibit 9.04. Buy List Turnover, Switzerland, 2014...138 Exhibit 9.05. Preferred Partnerships, Switzerland, 2014...139 8 The Cerulli Report European Fund Selector 2014
Expanded Table of Contents Exhibit 9.06. Outsourced Fund Selection Process, Switzerland, 2014...140 Exhibit 9.07. Databases Used by Swiss Fund Selectors, 2014...141 Exhibit 9.08. Use of Fund Ratings, Switzerland, 2014...142 Exhibit 9.09. Swiss Fund Selectors Selection Criteria, 2014...143 Exhibit 9.10. Swiss Fund Selectors De-Selection Criteria, 2014...144 Exhibit 9.11. Fund Sectors with No Unique Products, Switzerland, 2014...145 Exhibit 9.12. Prominent Brand Names in Switzerland, 2014...146 Exhibit 9.13. Firms with Good Product Specialists, Switzerland, 2014...147 Exhibit 9.14. Most Useful Events for Swiss Fund Selectors, 2014...148 Exhibit 9.15. Frequency of Unsolicited Manager Meetings, Switzerland, 2014...149 Chapter 10: United Kingdom...150 Exhibit 10.01. UK Mutual Fund Assets Under Management and Net New Flows, 2009 2013...152 Exhibit 10.02. Global Selection Teams vs. Independent Selection Teams, United Kingdom, 2014...153 Exhibit 10.03. Number of Managers on a UK Fund Selector s Buy List, 2014...154 Exhibit 10.04. Number of Funds on a UK Fund Selector s Buy List, 2014...155 Exhibit 10.05. Buy List Turnover, United Kingdom, 2014...156 Exhibit 10.06. Preferred Partnerships, United Kingdom, 2014...157 Exhibit 10.07. Outsourced Fund Selection Process, United Kingdom, 2014...158 Exhibit 10.08. Databases Used by UK Fund Selectors, 2014...159 Exhibit 10.09. Use of Fund Ratings, United Kingdom, 2014...160 Exhibit 10.10. UK Fund Selectors Selection Criteria, 2014...161 Exhibit 10.11. UK Fund Selectors De-Selection Criteria, 2014...162 Exhibit 10.12. Fund Sectors with No Unique Products, United Kingdom, 2014...163 Exhibit 10.13. Prominent Brand Names in the United Kingdom, 2014...164 Exhibit 10.14. Firms with Good Product Specialists, United Kingdom, 2014...165 Exhibit 10.15. Most Useful Events, United Kingdom, 2014...166 Exhibit 10.16. Frequency of Unsolicited Manager Meetings, United Kingdom, 2014...167 Appendix...168 Exhibit A.01. Number of Managers on a European Fund Selector s Buy List by Channel, 2014...168 Exhibit A.02. Number of Funds on a European Fund Selector s Buy List by Channel, 2014...169 Exhibit A.03. Number of Managers on a European Fund Selector s Buy List by Channel, 2014...170 Exhibit A.04. European Fund Selectors De-Selection Criteria, 2014...171 Exhibit A.05. Asset Managers Views on Factors Effecting De-Selection, 2014...172 Exhibit A.06. European Fund Selectors Selection Criteria, 2014...173 Exhibit A.07. Asset Managers Views on Factors Effecting Selection, 2014...174 Exhibit A.08. Largest 20 European Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...175 Exhibit A.09. Largest 20 French Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...176 Exhibit A.10. Largest 20 German Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...177 Exhibit A.11. Largest 20 Italian Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...178 Exhibit A.12. Largest 20 Spanish Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...179 Exhibit A.13. Largest 20 Swiss Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...180 The Cerulli Report European Fund Selector 2014 9
Table of Contents Expanded Exhibit A.14. Largest 20 UK Unfettered Fund-of-Funds Managers by Assets Under Management, 2013...181 Exhibit A.15. Largest 20 International Wealth Managers by Assets Under Management and Net New Money, 2012...182 Exhibit A.16. Largest 20 European Insurers by Net Earned Premiums, 2012...183 10 The Cerulli Report European Fund Selector 2014
Sample Section From: The Cerulli Report European Fund Selector 2014: Decoding the Buying Process
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 5 4 3 4.6 4.4 4.4 4.0 4.7 4.3 4.3 4.2 4.0 4.2 3.6 3.6 3.7 3.6 3.3 2.9 4.3 3.3 3.6 2.9 3.3 2 2.5 1 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
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
Company Index Abante Asesores...119 Aberdeen...39, 78, 146, 164 Allfunds...118 Allianz Global Investors...94, 147 Artemis...52 AXA...95 Barings...138 Bestinver...115, 128, 129 BlackRock...26, 47, 49, 138 Bloomberg...105, 123, 141, 159 BNP Paribas...158 Capital International...38 Carmignac...39, 78, 144 Cartesio...115, 128 CFS Rating...106 Credit Suisse...134, 135, 146 DeAWM...94 Deutsche Bank...94 Drescher & Cie...82 DWS...94 Ernst & Young...27 European Investment Consulting...104 evestment...89 Factset...89, 123 Fidelity...47, 79 Fitch...124 Flossbach von Storch...82, 87 Fundinfo...123 GAM...39, 47 Gruppo Generali...111 Gruppo Sanpaolo...111 Hargreaves Lansdown...160 Henderson...138, 146 IAMA Consulting...104 Inverco...116 Inversis...118 Invesco...39, 150 184 The Cerulli Report European Fund Selector 2014
Investec...39, 57 J.P. Morgan...47, 49, 90 Kieger...104 Legg Mason...82 Lipper...11, 84, 89, 123, 141, 152, 158, 159 Lombard Odier...133 Lyxor...52 M&G...47, 146, 164, 165 March Gestión...115, 128 Markov Processes International (MPI)...141 Mefop...112 Mercer...122, 123, 158, 159 Mirabaud...133 Morgan Stanley...90 Morningstar...11, 27, 32, 34, 37, 38, 73, 89, 122, 123, 124, 141, 158, 159, 160 Neptune IM...29 Neuberger Berman...138 Nutmeg...45, 150 Old Mutual...39 Pictet...133, 135, 146 Pimco...39, 47, 147 Pioneer Investments...111 Popular...117 RBC Capital Markets...39 Russell Investments...30, 42, 43 S&P...124 Santander...132 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...117 Unigestion...146 Vanguard...25 Company Index The Cerulli Report European Fund Selector 2014 185
Company Index Veritas Investment...25 Wellington...38 Western AM...82 Zürcher Kantonalbank...135 186 The Cerulli Report European Fund Selector 2014