ASSET MANAGEMENT: Nordic executive roundtable

Adopting a multi-boutique approach to stave off competition from investment banks has paid dividends for some asset management firms. Edited by Angèle Spiteri Paris Nordic_panel_1
Jacob Lundquist (Head of Fund distrubution, Nordic, Nordea), Jessica Malmfors (CEO, Skandia Fonder)
Ann Grevelius (Head of Swedish & Nordic Equities, SEB)
, Søren Rytoft (CEO, Alfred Berg)
Albin Rosengren (Partner & Head of Sales, East Capital)
Funds Europe: As a result of the alpha-beta separation trend, asset management firms are finding more competition from investment banks. How has this affected your business, if at all? Jacob Lundquist (Nordea): A couple of years ago we decided to work in a different way. We had to be more aware of whether we were producing alpha or beta within our own products and we also saw that we could not produce everything ourselves. In the old days the big universal banks produced everything themselves. What we took away from the increased competition was, ‘Yes, we are good at some things, but there are other product areas in which we are not as good.’ That’s why we created this multi-boutique approach where we bring in managers with very strong alpha skills onto our platform and in our name. Jessica Malmfors (Skandia Fonder): Products that consist of alpha and beta separation have not come to the Swedish mutual fund market, which I represent. The alpha-beta products only exist in a limited extent on the Swedish market and are only for sophisticated Tier 1 customers who are prepared to take the risks that are linked to these kinds of financial vehicles. It it has not affected our business at all. Ann Grevelius (SEB): I represent a full service bank with a very strong investment bank, and what we have seen is that the co-operation between the asset management division and the investment bank is increasing all the time. We are finding areas where we can cluster together and develop more tailor-made products for the clients. We try to create products for Tier 1 clients and then adapt them to other types of clients. So this development for us, as we have both these parts in-house, is an opportunity. Søren Rytoft (Alfred Berg): I completely agree with that point because it’s really a matter of working together. Alfred Berg is owned by BNP Paribas, a company with a large distribution network and also a full-service investment bank to support us. We are working very closely with each other. It’s about using each other’s capabilities and I think that investment banks and asset management companies are coming together. Sometimes we overlap on investment strategies or clients. However, this is a positive competition and if you work together in a constructive way I am sure that it leads to a much stronger offering to the client. Albin Rosengren (East Capital): We’re in a slightly different position in that we only do active asset management and offer alpha products. So the trend of alpha-beta separation has not affected us much. You have to make a distinction between the institutional and the fund distribution market. If we look at the fund distribution, I would say it has had no effect at all and you still have the clear demand from IFAs [independent financial advisors] and users for strong brand names, active management and good investment stories. Swedish, Norwegian and Finnish investors are still very much up to taking on active management, less so the Danish. However, we certainly see that some of the platforms that historically were focused on active managers are moving more towards beta pricing. On the institutional side, I would say that since we work with emerging markets we’re in the fortunate situation that, globally, institutions are very underweight. Also, the weighting of emerging markets in the global index is going up at a faster rate than that with which institutions have managed to deploy capital into these markets. So if you have a growing market, it’s easier to cope with competition. We’ve actually had some very good discussions with our institutional investors. On one hand, you have strategic allocations, which are long-term where they are still looking for active management, and on the other hand, you have the tactical approach. In these cases we’ve often proposed that clients go into retail products instead of our funds. We also have discussions with international investment banks on these type of products. Some institutions have alternative departments more focused on beta and alpha separation and that, of course, is a new opportunity as well. These would be Tier 1 institutions and there are not that many in Sweden which have the size to work in this way. But, considering our alpha has been quite stable historically, we see good opportunities in creating those kind of products as well. Malmfors: There is a polarisation between alpha and beta as regards the customer's demand for products – that is a trend you can see quite clearly and that is closely linked to the pricing of the funds. It’s all about whether you believe in alpha and whether you are prepared to pay for the value that it creates. It is also about how active the asset management really is. The banks are subject to criticism from the media since they are ‘accused’ of charging active prices for products that are close to index. I would be surprised if in the near future we don’t see the trend for index management come to the Nordic countries. It’s a trend coming from the US and the UK, where you have beta or index management which is priced very low and is a volume game. I really believe that that will come through. There is room for both beta and alpha investments. However, there is a growing number of institutional investors looking for the low-cost option to asset class exposure – whether that is through index replication, exchange traded funds or other means is more a matter of the wrapping. Rosengren: Another thing that can become an issue, more so in the Nordics than elsewhere, is the strong stand some institutions are taking on the ESG [environmental, social and governance] questions. We’re a partner of the DnB Group in Norway that is following Norges Bank’s actions in taking a strong stand on environmental and social engagement issues.  This is an opportunity for active managers, because if you want to have your own ESG policies implemented you need to go for a separate account. These investments could, in theory, be passive as well, but I think the active managers are quite well equipped to compete for that money. If you want to do active ESG work, you need to have active managers who will ring these companies and talk to them and engage in dialogue. Rytoft: If you want to sell anything to local municipalities or government institutions in any of the Nordic countries you need to have a certain degree of ESG in there, whether it’s following the convention set by Norges Bank, the United Nations or any of the other declarations out there. You also probably need to structure it to the individual market you are covering because each Nordic market is different. Lundquist: It seems to be that if you don’t do ESG as Norges Bank in Norway does, then in the Norwegians’ view you don’t do it at all. Rytoft: They are about changing the companies and the active managers, by default, are doing that. We were looking at our business model to see how we were incorporating these issues into our company selection. Grevelius: It’s necessary for long-term survival. Funds Europe: Do mutual funds provide a good entry point for independent asset managers in a market that is dominated by the banks offering guaranteed and lifestyle products? Rytoft: It’s an interesting question because this could be directed at the institutional market or at the distribution and retail side of things. And there’s a different answer for each one of them. If you want to be a successful independent asset manager, it really is about performance, especially when it comes to distribution to the retail market. Performance is the entry card. If you price it somewhat reasonably and you have good performance, you will be able to enter that market. Then it depends on how successful you are and what kind of marketing you do, but really it is performance that attracts people’s attention. That goes mostly for the distribution for the retail market. When it comes to targeting Tier 1 or institutional clients, then you need to apply a different skill set. Here, subjects like risk management, stability of team and the investment process are just as important as performance and pricing. Malmfors: I don’t know whether I fully agree with that. I agree that performance is important and we have a few examples of independent asset managers that have had great success in gaining volumes, such as East Capital. There are, however, just a few players on the Swedish market that have had similar success gaining volumes without having their own distribution. There are in principle two ways to get distribution in Sweden, either through the banks or through an insurance wrapper, which requires an upfront commission. The distribution is, to a large extent, a result of the compensation structure within our market. The brokers are mainly interested in selling the wrapper since that is what they are paid for. Furthermore, the brokers have now started to move backwards in the value chain and are setting up their own mutual fund companies and selling their own products. The large banks have their own distribution, which is really strong, and they mostly sell their own products. It’s not that easy to enter the Swedish market as a new asset manager because you need to have the distribution power. Yet at the same time, it’s a strength to be independent from the distribution and if you are one of the few that succeed in building a strong brand, there is great potential. I would like to add that I think that we are going to see a change going forward. The large banks’ distribution power and large stocks will be challenged as regulation will enable higher degree of transferability. With such wind of change the possibility for new independent players to gain market shares on behalf of the banks will increase. Lundquist: You mentioned regulation and I think this will be a challenge for fund companies also. Basel III will demand the universal banks to hunt for deposits. So I fear for the ones responsible for selling the funds internally in my company because there will be fierce competition between funds and deposits. Grevelius: It is really important to keep the clients’ best interest in mind and I’m sure all the banks will do this. However, the distribution capacity in a small market like Sweden has been very valuable and different asset managers use it in different ways. SEB opened up very early for competitors so we evaluate our own processes and managers in exactly the same way as we evaluate external players. As a result, we’re open to strong asset management and strong boutique concepts from external players in areas where we feel we do not have a competitive edge internally or simply as a complement if there are good reasons for it. I would say that performance is important, absolutely, but you need something more; something special. We know East Capital has been really successful in being so early to market and ‘discovering’ emerging markets. I would say that a strong brand, distribution capacity and this special edge are all important for independent asset managers to succeed. Malmfors: It’s a fact that Swedish investors are quite nationalistic when selecting investments. Swedes prefer to eat Swedish meat and we like to invest our money with Swedish asset managers. That applies also within emerging markets or global equities where there is no rationale that a Swedish asset manager would do a better job. The Swedish retail clients want to invest in well-known brands that they recognise from magazines, television, etc. It’s about marketing and it’s about feeling confident in the people you assign to take care of your savings. Another point that I would like to make is that Skandia has been the driver in Sweden to enable entry to a number of  independent asset managers and it’s something that is inherent to the company. It is embedded with Skandia’s culture to sell funds managed by external asset managers and the feeling of independence is important even to Skandia’s own distribution team. Lundquist: It’s very interesting that in financial institutions like ours there is a huge fight, internally, to get independence on the fund side, but I have never heard advisers talking about being able to offer loans or ordinary saving products issued by other groups. But somehow you feel that on the fund side you should be so independent. It’s good, but it’s interesting that it is only on the fund side that we want this competition. Rytoft: Wouldn’t you say it’s about time? You have online sites that compare prices on credits, on loans or on most other savings products, so it’s just a matter of time until you have that on the funds side. Rosengren: What the question is really asking is whether the market is open for distribution of independent asset managers or not? It is a very good question. Jessica, to refer to what you said about the Swedes wanting Swedish managers, I think the French are just as bad, if not worse. Also, if you look at the Skandia platform I am sure that your proportion of international asset managers is much higher than the market in general. So really the argument comes back to the economic incentives for banks and organisations to offer external products. Skandia’s business model is different to that of the banks, but the banks are in the process of a transformation, which will take time. You have things like the Basel rules coming into effect, you have a strong political lobby against proprietary trading and other things that are triggering banks to fill their pipes and their networks with ETFs [exchange-traded funds] because it’s a way of creating business. In this environment the opportunity for independent asset managers will depend on their edge, on their brand and on their performance. But it will also depend on the business model of the banks, and that takes some time to transform. Today it’s very difficult. There are very few examples of successful independent asset managers that can raise good amounts of money but, little by little, the big banks are losing market share and probably compensating that revenue loss with other business. Lundquist: Nordea has a tradition of a strong internal distribution and some years ago we said, ‘Why not bring our products out to other players as well?’ The way to do that was simply to focus on it. The Nordea fund company was born with the internal distribution so its easy not to look beyond that. But we realised that all we had to do was to take some of the funds Nordea has and show them to the market. We also understand that distributors form a different segment of the market and they cannot be considered the same as the other institutional clients. You have to treat them differently and you have to find solutions for some of the sub-segments you find within third-party distributors. It wasn’t easy, but we had to tell ourselves, ‘We are going to start focusing on the distributors and we will dedicate resources to try to gather our money from outside the bank.’ Funds Europe: It has been said that Nordic asset managers want to increase their third-party distribution. How are they going about doing this? Rytoft: There are many things you can do and it differs from country to country. It also differs across segments and it is important to understand what you’re trying to sell, whom you’re trying to sell to; if you understand that then you’re in a much better position to increase your distribution power. That’s the first part of it. Then you need to have the right products and good performance for the client group in question. Once you have that, combined with an operational setup, then you are on your way to creating some distribution power for yourself. Of course, we at Alfred Berg would like to increase our distribution power, anybody would like to do that. But in reality we have to limit ourselves to a number of strategies where we can say, ‘This is what makes sense for us for the next six months, twelve months or whatever horizon matches the target group.’ By doing this you’re completely focused on what you would like to do, you are making a strict plan about your target market and have a better chance of covering the chosen client group. In some ways, distributors want to be treated like an institutional client, but they are not. So it’s interesting because you can use institutional ways of approaching them, but once you have them as a client they demand a completely different service from you. Therefore, it’s not just about signing the agreement, there’s much more to it. It’s about delivering the client service and the necessary follow-up after the agreement has been signed. Grevelius: Yes, building relationships is important. We have been trying to reach out to Europe. Maybe we haven’t been as successful as Nordea but we have had some success here and there. What we have learnt is that we have to focus and try to build partnerships where we can work with the distribution and packaging of the products and also try to find a good balance and build a deeper connection. You cannot try to be everywhere, but everyone is talking about third-party distribution as a phenomenon and it’s getting to be more important for everyone. Funds Europe: Albin, from the point of view of an independent fund manager, what does this mean for competition? Rosengren: It’s a good question. Getting distribution is difficult anywhere and it requires a lot of legwork. When compared to a large organisation, we have the disadvantage of not having the same resources, so we have to focus a bit more. For example, we can’t test being in Korea for ten years without making money like some of the large American asset managers can. Therefore, if all the large Nordic banks start competing with us internationally, then there are probably those that have more resources than us and can get more local teams that push the local IFAs [independent financial advisors]. Germany, for instance, is a huge and very dispersed market, so for us it’s difficult to do any IFA business there as it would require enormous investment. Therefore, in some places it probably makes it very difficult for us, but on the other hand, in other places we have a clear edge and the market is structured slightly different and we can compete. Malmfors: The large banks control a lot of the distribution today and even though external funds are included in the offering the banks mostly sell their own products. In such an environment it is not that easy to increase third-party distribution. To take market share through third-party distribution you need to have a unique touch; you need to have something special and different. I believe that the bank’s strong position will be challenged going forward as we can expect assets to become more transferable. The clients who have their assets more or less locked in with the banks due to regulatory and fiscal reason will have a better position to move their assets. In that new environment I believe that asset managers who are independent of the banks will be able to take market share. One product that will be introduced on the Swedish market shortly is the ISA, the investment savings account (Sw.Investerar Sparkontot) with the purpose to enable people to be active with their investments and switch between funds and securities without any tax implications. The introduction of the ISA would have led to even higher market activity should the proposal have included a right to move existing assets into the ISA without tax consequences. Still, it’s a distinguished step towards a higher degree of transferability and competition where the bank’s distribution will be challenged by other asset managers. Grevelius: Another thing I’d like to add to the third-party distribution discussion is that when we go out in other markets, it is really important to focus on what kind of products we are actually selling. When we go to Germany or Italy, we have a competitive edge in Nordic equities. Here, there is a whole sample of asset management offering similar products but when we go down there and offer the Nordic opportunity, we are considered to be a small niche player. In our markets we are huge, together with the other Nordic banks, but in other parts of Europe we’re more of a boutique player and not with a very strong brand as in the Nordics. Rosengren: We’re generally associated with our regions. Grevelius: Exactly, so we have to find our edge and push that. Funds Europe: How have the relationships between the asset managers and the distribution arms of the big banks changed? Do you find that asset managers are offering a lesser share to their distributors? Also, do you foresee a regulatory review mirroring the UK’s RDR being implemented in the Nordics? Rytoft: I think it’s a matter of concentrating on a limited number of distributors and saying, ‘These are my main ones.’ If I, representing Alfred Berg, would go out to distributors, I would concentrate on a smaller number, but that’s a matter of resources. But there are a number of questions you need to ask yourself, ‘Does the distributor cover what I’m trying to offer? Is the distributor looking for a discount solution where my input and capabilities are not going to be worth as much?’ Then you can do something about the kickback if there is a higher service level involved in your offer or if you would need to educate the distributor’s sales force. That would be another price point. It’s a matter of reviewing the kickback arrangement rather than just giving the default 50 per cent rebate. It seems as though people are looking to differentiate their relationships and are saying, ‘What are you actually delivering?’ For example, if I had a distributor saying, ‘I need you to train my sales force twice a year on your different strategies,’ I’d be happy to do that, but there is a price. So it’s all about the agreement that we need to establish with each other. I’m not sure that there is a downward pressure on the kickback, but it’s more about the discussion around what you’re supposed to be delivering. Lundquist: I agree. We are moving away from this uniform 50/50 solution. We are not necessarily moving to a solution where it is 30/70 as a standard, but we are moving away from the current standard. Rosengren: Like you say Søren, you’re seeing more concentration on what is core distribution and what is non-core. This is part of the changing regulations in the market; who is allowed to promote mutual funds, in what wrappers and in what structures? This uncertainty makes some past distributors less active now. But I interpret the question differently. I was thinking more of the overall cost pressure on the service wrapped as it was. I mentioned the PPM pension reforms where there are tenders every third or fifth year now, depending on the platform, for asset managers to go on these pension solutions. The indicated price structures allow for little active management where the total outtake is to be split between the asset manager and the provider of the service. We’ve chosen to stand outside this because there is no business for us, the business models don’t match. So while we have had very good co-operation with insurance companies or banks, we are unable to participate with them in their tenders for this business for cost reasons. Otherwise on distribution I see little changing. The potential of an RDR-type regulation in these regions ties in with the implementation of MiFID in certain countries. I’ll give a very simple example, for a Swedish asset manager working with fund of fund managers or discretionary managers in Italy. They implement the MiFID directive and all the retrocessions received by our counterparty should be transferred to the client’s account. They [the Italian discretionary managers] can’t, from a technical point of view, handle the distribution of the retrocessions to people’s accounts. Therefore, the solution to that would be for them to stop using external providers and use the vertically integrated asset management company, which is part of their group instead. This means they will ultimately capture an even higher proportion of the total fee outtake in one part or other of their organisations. As a result, you have less competition and instead of the reforms trying to promote independence they actually force players to take a step backwards. The Swedish asset manager will be affected because we’re not allowed to issue different share classes, so you can’t tackle the problem that way. So if we’re moving towards a situation similar to what the RDR set out for retrocessions, you run the risk of having a re-grouping of the big players , whether it be banks or insurance companies, just so they can meet the regulations and thereby also capturing even more business. It hasn’t really happened yet but I see that as something that will change the business relationships there. Malmfors: The Swedish FSA has recently filed a request with the legislator that there should be a ban on commissions in Sweden. Also there is a review of MiFID going on at the moment, which indicates that rebates could be forbidden going forward. It is therefore possible that the RDR will come to Sweden. Funds Europe: How real is that prospect? Malmfors: My view is that the Swedish legislator will go through with it if it comes through the EU as a result of the MiFID review. I don’t think the Swedish legislator will introduce bans on rebates and on commission without clear directions from the EU. Funds Europe: What would the repercussions be on each of your different businesses if commissions and rebates are no longer allowed? Malmfors: We need to restore the confidence and trust in the retail investment market and kill the myth that investment advice is free. The push attitude combined with a wish to appear as independent creates a conflict with lack of trustworthiness for the industry as a consequence. Introducing a ban on commission could be one way of solving this issue. The question is, however, if the client would be helped by an absolute ban. Another way to do it would be to increase the transparency by making it the adviser’s responsibility to inform the clients that he or she gets provision for selling the products. Consequently, an independent financial advisor should not be allowed to receive commissions. There are people who are prepared to pay for independent advice and they should be able to trust such independency. Grevelius: Transparency is good. The need for transparency would be higher. Malmfors: One problem with all the transparency requirements that we see coming is that it’s not for sure that the clients understand what to look for. To me it’s not transparency to provide the client with a booklet which includes complicated information on page 58 about what the
advisor is paid for selling the product. So
my concern is that the transparency requirements don’t always fulfill their purpose. Funds Europe: If rebates to distributors are banned, what impact would that have on a business such as East Capital? Rosengren: There are already examples of distributors that choose to give back the rebates to their clients and thereby charge a fee for their independent advice. So if you take back the retrocession and they give it back, you already have a shift of how you present the fees. This is an an example of how you can restructure the business to become more transparent. Fees for asset management services would go down because that distribution rebate would instead be charged to the client for the advisory service. It doesn’t need to be that radical a change.  Again it comes back to the concept of independence and the banks and other large institutions adjusting to being fully independent in the advice they give. As I said before, it’s a gradual and long process. However, the implication of such a rule doesn’t need to be that drastic. Of course, if you really want to make it independent then the banks should give independent advice and they should not be incentivised internally to promote group products. Funds Europe: Is the guided architecture seen in the Nordic regions moving on to more of an open architecture model? If so, what challenges or opportunities does this present? Grevelius: The question is what is the best way? It’s hard because with a fully open architecture there are so many options that choosing between the products would be very difficult. Maybe something like an open guided architecture would be more suitable. Malmfors: My first question would be, ‘What do we mean by open and guided architecture?’ Sometimes I notice that these terms are used in different ways. To me guided architecture is that the distributor selects a number of products (that could be either the distributor's own products or external products) and that the distributor sells that selection under its brand. Open architecture offers more or less all the funds out there without any selection process. Interpreted to Skandia’s organisation the
unit link platform with a selection of approximately one hundred funds would be the guided architecture. Then the open platform would be through our bank, which offers maybe a thousand funds. However, then the organisation also has the option of providing recommendations on how to invest within both the guided and the open architecture. So sometimes there is some confusion and the lines are a little blurred. Lundquist: Distributors started out with this long list of funds on their platform, but I think many of them now want to reduce the number of funds that they are offering to their clients. Malmfors: I agree and I wonder whether the customers are really helped by a true open architecture. Most customers find it difficult to choose from a thousand funds. I don’t
know what has been the driving factor behind the trend towards open architecture. To me, the interesting question is not whether the financial organisations offer one hundred or one thousand funds but rather to which extent the banks sell externally managed funds. The message from the legislator is crystal clear: the competitive situation will have to change and the banks dominant position must be challenged. Funds Europe: I would say that, conceptually, it’s about having the choice and not being restricted to choosing funds that have been pre-selected. Grevelius: In the bank I would say we have a full open architecture, but from that we choose what to present to our clients. Otherwise both the clients and the advisors get totally mixed up looking at a thousand funds. So we put a lot of effort into choosing the funds we showcase, and within the guided architecture we have both internal and external products. To be considered trustworthy we have to have competitors and externally managed funds as part of our offering. Malmfors: But then we are again back to the power of the distribution. When selecting the showcase for the clients you can either have a true independent approach or you can steer the assets towards the products that are sold for other reasons. The interesting question is not which funds you offer if the clients specifically ask for them, but rather which funds you sell. I am one of those who believe that funds are sold and not bought. Grevelius: But you don’t just pick the funds, you add an advisory service and the clients have to understand that, and I believe they do. This is a value-added service we provide; we do this job for them. Then its very important for us to show the process behind the choices we make within our guided architecture. Rosengren: It’s about asking, ‘What do clients want?’ They want information about why the product is interesting, and if you have an in-house asset management company you have to make that link clear. It goes very well with what we were saying about the whole change of the industry. The value-added service from the banks will be selecting the best for the client, wrapping it in the right way and providing sufficient information about it. For us, not being on a guided platform means zero business, so that’s not good, but being on a fully open platform on the other hand may not be good for business either. This is because although you would get some business there is no structured business model for how the end client will get information about your funds; they have no one to hold their hand. So we very much prefer guided architecture. What has changed a bit is that we’re seeing several forces at work. Guided architecture in the sense of someone choosing a specific fund for a client is decreasing. If you take SEB and if you look at the businesses we have going together, it’s less retail now than a couple of years ago and more private banking and institutional. So you are getting more open architecture on that end, but what does this mean for the retail side? It does not necessarily mean you’re seeing less independence but rather that the whole advisory model is changing. This is also part of MiFID. You have less selection of funds and you have more discretionary management, more fund-of-funds and more packaged products. That presents an opportunity for us. You can call it guided architecture but really, for the banks, it’s about controlling the quality of advice. But talking about a platform as the end client choosing a specific fund, that’s decreasing overall in the market. Funds Europe: How will the Swedish taxes on fund savings affect your business, if at all? Grevelius: We see it as an opportunity because it will put a strong focus on the savings area, which is quite important for SEB, being strong in private banking and having those kinds of clients.  So we see an opportunity for focus and discussion and are looking forward to it. Malmfors: The mutual fund company I represent has all its funds registered in Sweden and we haven’t distributed our funds abroad due to the tax arrangements. This is a great chance to start selling our funds internationally. Rytoft: We are exporting Alfred Berg funds to the big networks within BNP Paribas and to external distributors around the world. As a result of this we often have Swedish domestic registered funds as well as domestic funds in the other Nordic countries. Often you even have to have the same strategy registered with your Sicav in Luxembourg for international distribution. This is not optimal from a cost perspective, but sometimes needed. Funds Europe: Will the changes in tax rules mean that you might be able to streamline that now? Rytoft: I’m sure we will be able to streamline that. I think much of it is going to be based in Luxembourg in the future, which is much easier because that means everybody can buy it. You will then have local rules, Sweden being one of them, Denmark being another, where you would prefer to have domestic funds. This is always a hassle because it creates more costs for you. But I really believe that it will have an impact on all of us in the way we construct how we sell our funds and through which vehicle we’re doing it. Lundquist: This is not only about Swedish tax rules but also about Ucits IV. Grevelius: Yes, it’s a big issue. Rytoft: A huge issue. Malmfors: One of the main purposes with the Ucits IV regulation is to increase the possibility for mutual fund companies on the European fund market to compete under same conditions. In line with that and to avoid that Swedish funds are moved out of Sweden, the legislator will abolish tax on Swedish funds. So far, so good. I do fear that the Swedish regulator will only implement Ucits III.V due to their strict view on how to apply the legislation and establish a local market practice which is not always in line with what the rest of Europe considers as market practice. Unless we can create an environment with rules and a regulatory approach similar to other countries I fear that companies will seriously consider moving their funds somewhere else. Rytoft: The question is, ‘Are you issuing this regulation to protect the investors, or are you doing it to make it more difficult for everybody?’ There is a clear lack of practicality. The voice of the industry is also lacking. It’s not completely missing but it’s not as loud or as present as it should be to help make the rules become practically workable. And that is needed because its one thing to protect investors but you also need to look at it from an asset management point of view and whether it’s practical or economically feasible to sell a certain product in that way. Rosengren: We must have great confidence in the legislator that they will do this in the right way. I don’t want to say anything else about that. For us, Ucits IV is very welcome as a set of guidelines and we expect them to be implemented in line with best practice. I don’t think the taxation on the funds has prevented us from doing business, because most of the tax is offset by distribution and you will hold the tax on that distribution until it becomes something very small. If you compare it to one basis point tax on a Luxembourg fund, it’s obviously more expensive, but it’s still fairly small. Otherwise Ucits IV will further help us to harmonise things and will probably make us more competitive. Funds Europe: What would you say are the most prevalent risks you are facing, and will have to face, over the coming year? And how do you plan to tackle them? Grevelius: I would say general regulation for the financial industry as a whole and regulation specifically for the fund business will be a challenge, cost-wise and also around setting standards and adapting. The challenge will be to get through that and be able to do our job well. Rosengren: I’m struggling to see risks that would really affect us in the coming twelve months. The markets are always going up and down and I think that will affect us the most. Otherwise I tend to see more opportunities in the developments ahead rather than focus on the risks they present. Lundquist: Right now, I consider the fight for deposits mentioned previously a great challenge. I think about how that will affect my ability to sell mutual funds. I’m pretty sure
that the only way of coping with it is to be sure you have a product that delivers performance and that you really deliver on your service promises. I don’t have to do anything
very special, just good, old-fashioned delivery on promises. Malmfors: In my opinion, one of the risks is around the uncertainty of what the playing field is going to look like going forward and what we need to do to prepare for the changes that will come. Because we don’t really know, the changes could entail both a risk and an opportunity depending on what you believe about the future and whether you take action to align to such a new environment. Rytoft: Apart from what has been said about regulation being high on the agenda, I would say the economic environment poses another risk to our industry. What is happening in the world’s macro economies will play a major role in what we can actually deliver to our clients in terms of performance and also in terms of which strategies they would be prepared to buy from a risk perspective. Volatility in the markets will prevail for some time and I don’t see that going away right now. ©2011 funds europe

Executive Interviews

INTERVIEW: Put your money where your mouth is

Jun 10, 2016

At Kempen Capital Management, they believe portfolio managers should invest in their own funds. David Stevenson talks to Lars Dijkstra, CIO of the €42 billion manager.

EXECUTIVE INTERVIEW: ‘Volatility is the name of the game’

May 13, 2016

Axa Investment Managers chief executive officer, Andrea Rossi, talks to David Stevenson about bringing all his firm’s subsidiaries under one name and the opportunities that a difficult market...


ROUNDTABLE: Beyond the hype

Oct 13, 2016

The use of smart beta investing continues to grow. Our panel, made up of both providers and users, discusses what the strategy actually means, how it should be used and the kind of pitfalls that may arise when using this innovative investment technique.

MIFID II ROUNDTABLE: Following the direction of travel

Sep 07, 2016

Fund management firms Aberdeen and HSBC Global meet with specialist providers to speak about how the industry is evolving towards MiFID II.