INTERVIEW: Atlantic crossing

Crossing the Atlantic is a challenge for asset managers, no matter on which side the home port is. Stefanie Eschenbacher talks to Mike Niedermeyer of Wells Fargo Asset Management, which strengthened its European product range this year with several new additions.

Asset managers in Europe and, for that matter, most of those elsewhere in the world, usually harbour ambitions of eventually crossing the Atlantic to sell in the US.

Trying to establish themselves in a new market, means having to cater for different investor preferences, build a solid distribution network and a competitive sales strategy.

But there are differences not only between the US asset management industry and the European one, but also within every single European country.

Mike Niedermeyer is chief executive officer at Wells Fargo Asset Management, which recently added six new funds to its Luxembourg umbrella.

These are the Emerging Markets Equity II Fund, the Emerging Markets Income and Growth Fund, the Global Opportunity Fund, the Precious Metals Fund, the US Premier Growth Fund and the US Short-Term High Yield Bond fund.

Niedermeyer says he envisages other strategies to be launched in Europe, such as European credit and European high yield strategies. “The proxy is what clients want,” he says. “We talk with sales organisations about what they need and what they are looking for.”

Many asset managers in Europe have struggled to remain competitive in an ever more saturated market, hit by the financial crisis and a wave of new regulation.

Niedermeyer says some US-centric products will not fit European investors’ preferences and acknowledges that even within Europe there are differences – some products will sell in the UK, but not in Germany.

All-cap strategies, for example, were not particularly sought-after in the US, but Niedermeyer says European investors are much more open to the all-cap idea.

“The keys to success are not who owns you or where you are, [but] what generates top performance, transparency and risk controls,” he says. “There are plenty of managers locally who do not do that.”

Niedermeyer says the tipping point for his decision to expand in Europe was the sales success. Prior to adding the six funds in July, Wells Fargo Asset Management already had seven funds in Luxembourg. Those had been launched since 2008.

“There are companies with lower assets under management that have far more international customers,” Niedermeyer says, adding that Wells Fargo Asset Management sticks out as one with a low number of international customers.

“What we do have is distinctive and high-quality products,” he says.

In 2008, Wells Fargo & Company acquired Wachovia Corporation, creating one of North America’s most extensive distribution systems for financial services. Today Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance.

While Wells Fargo Asset Management initially kept a low profile in Europe, Niedermeyer says there is an opportunity to grow as he can provide access to strategies that were not previously available.

About $30 billion (€23 billion) of the group’s total $450 billion of assets under management comes from Europe. The majority of this – 52% of the global business – is held in separate accounts managed on behalf of institutional investors.

However, Wells Fargo Asset Management is also expanding and focusing its efforts on the lower institutional end. Those include funds of hedge funds, large platform providers and private banks in Europe.

Following investor demand, Niedermeyer says Wells Fargo Worldwide Fund sales increased from $12 million in 2010 to $393 million in 2011 to $721 million at the end of the third quarter of 2012.

Niedermeyer says the focus is now on gaining more traction in Europe, a market he considers to have more potential for many asset managers than the US home market.

Since July, Wells Fargo Asset Management has been continuously registering funds for distribution in European countries. Austria, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Spain, Sweden, Switzerland and the UK.

When crossing the Atlantic, Niedermeyer says, some of the differences in Europe, as well as the countries within the continent, become immediately obvious.

“In some aspects we are ahead and in some not,” Niedermeyer says.

“Some of continental Europe distribution aspects feels like the US was a decade ago.”

Niedermeyer says there is currently one fund in the 13-strong Luxembourg Sicav umbrella which was closed to investors in September and there are no funds he plans either to merge or close at this point, although he concedes that some funds still have to gain traction.

“All products in Luxembourg have been proven successful in the US,” he adds.

Niedermeyer says in recent months, a disproportionate amount of money has come from equity sales. Whereas many other asset managers saw stronger demand for their fixed income products.

“In Luxembourg we anticipate the need to soft close some of the funds. There is no hard number [at which we might soft close funds], but we work closely with the portfolio managers of the small cap components because we do not want a negative impact on existing clients,” he says.

The group as a whole has more than 40 portfolio management teams in the US, the UK, Europe and Asia, with 500 investment professionals, including fund managers, analysts and traders.

Despite the competition in Europe, Niedermeyer says he feels he is in a better position than European managers trying to establish themselves in the US. He says his ambition is to be one of the top 20 asset managers within the next seven years.

The business was founded in San Francisco in 1852 by Henry Wells and William Fargo to cater for the country’s banking and express needs during the height of its westward expansion, including the gold rush.

Today Wells Fargo is a community-based financial services company with $1.3 trillion in assets.

Niedermeyer has been with Wells Fargo Asset Management for more than 25 years. One of nine children, he started as a lumber merchant before moving into the investment world.

©2012 funds europe



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