Inducements linked to fall in bank distributor assets

Retail bank distributors saw a near €4 billion drop in assets of sub-advised funds.

Meanwhile, third-party asset managers, along with private banks that are increasingly offering sub-advised services, saw assets rise by €5 billion in the second quarter of the year (Q2), according to the instiHub Analytics data covering Europe, Middle East and Africa.

Wealth managers increased assets by €10 billion.

Andreas Pfunder, founder and chief executive of instiHub, said the figures showed two extremes in the sub-advisory industry, with retail banks on one side losing assets, across from other firms gaining assets.

Pfunder has related the trend partly to commercial arrangements – mainly meaning inducements – which are widely used in retail bank distribution in Europe.

“We have to remember that retail bank affiliated sponsors of sub-advised funds compete against third-party managers’ funds. It comes down to performance, differentiation and [the key point] commercials.”

In research earlier this year, Pfunder noted that sub-advised programmes, both active and passive investment strategies, made “greatest progress” in markets where inducement limitations were in place.

Inducements, which the incoming MiFID II regulation will affect, can continue to be paid to bank distributors in most markets where banks are dominant when the regulation is implemented, Pfunder noted, and so banks’ preference for in-house products will therefore be driven by their built-in margins versus commissions from third-party asset managers.

The latest research showed that in euro terms, bank distributors lost €3.8 billion of assets in Q2, though five firms, which were unnamed, gained the equivalent of $1 billion each with growth coming from Italian, Dutch and Nordic investors.

Asset manager sponsors grew assets by €3.2 billion in Q2 and 16.4% year-to-date.

Private bank sponsors experienced the largest growth in percentage terms, at 14% or €1.5 billion in Q2.

Pfunder said that asset managers needed to broaden their offering to meet clients’ demand in areas where they lack in-house expertise.

He added that the findings, based on publicly available data, showed that the sub-advisory industry “isn’t as sleepy an industry as some assume”.

©2017 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

The tension between urgency and inaction will continue to influence sustainability discussions in 2024, as reflected in the trends report from S&P Global.
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

CLOUD DATA PLATFORMS

Luxembourg is one of the world’s premiere centres for cross-border distribution of investment funds. Read our special regional coverage, coinciding with the annual ALFI European Asset Management Conference.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST