Archive for October, 2010

Knowledge is power… the rise of the Analyst

October 14, 2020

An Article by Roland Meerdter Managing Director at Propinquity Advisors

Roland Meerdter, Managing Director at Propinquity Advisors will speak at FundForum USA

Through the market turmoil and rapid evolution in the asset management industry over the last several years, one thing remains crystal clear. Decisions about the buying and selling of investment product are increasingly concentrated in the hands of manager research analysts.

Collectively, the global group of analysts who work within broker/ dealers, banks, RIAs, institutional consulting firms and other financial intermediaries are arguably the key client group for asset managers. Their opinions drive a sizable (and growing) percentage of the overall worldwide flows into and out of funds.

Given changes in regulatory environments, a fiercely competition landscape and the increased complexity of the investment environment, professional buyers using a highly sophisticated institutional selection process will eventually be the norm worldwide. Successful asset managers are structuring their organizations to prepare and capitalize on this development.

The strengthening role of the analyst is driving asset managers to reevaluate their approach to selling and supporting their products. Asset managers are using robust strategies for liaising with analysts and ensuring their needs are met.

Well-equipped and ultimately successful asset management firms understand the selection process and the mindset of the analysts who are responsible for driving a major portion of worldwide flows. They understand that developing strong relationships with analyst teams is a tremendous leverage point for their business.

These managers provide information and support that goes well beyond a factsheet and market commentary. They anticipate the need to support the analyst during shifting market phases and through changes in the investment product. They recognize that presenting to an analyst is not a sales pitch but a dialogue with a knowledgeable counterpart who a tremendous level of information at his or her fingertips.

Such managers recognize the particular challenges of the analysts’ job and seek to alleviate some of the pressure points through timely flows of information, with honesty and transparency.

Analysts tend to be a highly skeptical buyer group who work within an environment that is performance-driven, risk adverse and highly regulated – a complicated combination. Analysts don’t take kindly to being given the ‘hard sell’. They follow a structured decision making process and, in order to do so, need to have access to clear and concise sources of information about the investment product in view.

There are, as most recognize, already far more investment products available then are needed. Nonetheless, worldwide product proliferation is at an all time high. Further, the growing complexity of a new generation of products requires analysts perform sophisticated and careful analysis to get comfortable enough to render an opinion.

The converging of aspects of what once were called ‘alternative’ and ‘traditional’ are leading to an evolved playing field for managers and analysts alike. Complicating manners further, the commonly used approach to asset allocation and the theoretically tenets upon which it is based are being eroded at a rapid rate.

At the same time, the strength of ETFs, structured products, and a variety of other wrappers has pushed the competitive landscape for asset managers to new levels.

‘Post-crisis’, fund analysts are demanding even more from asset managers. The products they are interested in buying display attributes distinguishing them from successful products of the past. Innovative managers who can prove that they have the sustainable skills to develop and manage these products and service the sophisticated needs of analysts stand to gain; others will be left behind.

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Roland Meerdter will moderate a panel of Fund Selectors debating “What product attributes appeal to the post-crisis fund buyer and what really influences the buying decisions?” at FundForum USA 2010 on November 1 at 11.40 am.

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About Roland Meerdter, Managing Director at Propinquity Advisors.

Roland Meerdter is the founder of Propinquity Advisors - a consultancy providing asset managers with advice and guidance from the perspective of the professional buyer.  Prior to his current role, Mr Meerdter was the Managing Director and global head of fund selection for Deutsche Bank.  Over the last decade, Mr Meerdter has reviewed , analyzed  and interviewed thousands of managers around the globe.  He was worked extensively in both the US and Europe.  He is an industry thought leader in a range of tropics including fund research/ selection methodology, convergence of alternative and traditional investment approaches and global distribution.


Post Under: Fund Selection

A complete round up of news and views from FundForum Middle East 2010

October 11, 2020

FundForum Middle East is the “must attend” annual wealth management conference.   On behalf of our sponsors,  we would like to thank all the delegates and speakers who attended and participated in the many panels, debates and networking events.

We have captured a series of video interviews with some of the industry leaders which will be posted on this site over the coming weeks.   To make sure you don’t miss out, either add the RSS feed to your reader or sign up for email alerts.

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AMEInfo.com - Fund Forum Middle East 2010 opens with Bahrain EDB focus on fund management

In his opening address at the event in Manama, Shaikh Mohammed highlighted Bahrain’s long and impressive track record within financial services, particularly in fund management, and to the structural growth drivers of a rapidly expanding domestic population, and growing prosperity within the region, which is underpinning long term demand for financial products and services. The increasing contribution to world economic growth from the Middle East, alongside other emerging markets such as China and India, prompted Shaikh Mohammed to also identify the ‘rise of the East’. more here

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Gulf Daily News - With the world’s largest concentration of millionaires, fund managers across the globe are taking a long, hard look at us.

That was the message Economic Development Board (EDB) chief executive officer Shaikh Mohammed bin Essa Al Khalifa had for delegates at the opening session of the 4th Annual Fund Forum Middle East at the Diplomat Hotel yesterday. more here

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Zawya.com - Bahrain GDP to grow 4.5%

The Kingdom’s Gross Domestic Product (GDP) growth was expected to hit an impressive 4.5 per cent this year from three per cent in 2009, Chief Executive of the Bahrain Economic Development Board Shaikh Mohammed bin Essa Al Khalifa said yesterday at FundForum Middle East 2010. more here

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Gulf Daily News - Awareness drive “crucial”

“The asset management industry is evolving at a deceptively fast pace,” said Mr Stockell, Ernst & Young (E&Y) EMEIA Asset Management Leader, in his keynote address at the FundForum Middle East 2010 conference. “Asset managers and service providers face challenges every single day whether it’s managing business growth, mitigating risk, providing transparency or embracing regulatory scrutiny. We aim to steer the dialogue between fund selectors and asset and investment managers for improving wealth management practice in the region.” more here

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Gulf Times - ‘Gulf investment management industry largely untapped’

Speaking ahead of the FundForum Middle East event, Sico CEO Anthony Mallis said: “The global financial crisis triggered a chain reaction, which reached the GCC almost simultaneously, negating talk earlier of a decoupling with other financial markets. Despite the impact of the crisis, however, we believe that there are positive growth opportunities for the GCC asset management industry, although we remain concerned that a number of key challenges still need to be seriously addressed.” more here

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Trade Arabia - Market research ‘vital for industry growth’

“Market research can play a vital role in regional financial markets if players are prepared to look at the benefits of this highly-important management and marketing tool”.  That is the view of Insight Discovery chief executive officer Nigel Sillitoe, who chaired the morning session of the Fund Forum Middle East 2010 at the Diplomat Radisson Blu Hotel, Residence and Spa yesterday. more here

Post Under: General

Asset Management in the Middle East: Ten big changes to watch for in the next decade

October 4, 2020

An article by Andrew Hutchings

Andrew Hutchings, Chairman and co-founder of Universal Copywriters (Uniwriters)

Developments over the last thirty years in other parts of the world indicate where the industry could be headed in 2010-20.

In asset management, as in other industries, the short-term excitement about a change often exceeds reality. Regulatory changes, entry of new competitors, movement of high profile executives, development of new products and distribution deals can generate interesting headlines, but very rarely result in profound changes to the landscape. The changes that really matter actually come from trends that operate over five-to-ten years, if not longer.

It is now nearly 30 years since yields on U.S. Treasury bonds peaked, providing the impetus for a secular bull market in equities, which ran to the year 2000 in the U.S. and for longer in other countries. The rise in the U.S. stock market, and the international investment opportunities that became available as a result of the lowering of barriers to capital flows, shaped the development of the U.S. mutual fund industry in the 1980s and the 1990s. In Europe, the key factors were the Undertakings for Collective Investments In Transferable Securities (UCITS) directive(s), from 1985 onwards, and the widespread realization that demographics were such that individuals would have to do more to provide for their own retirement incomes. In Asia, the key issues are that economies are likely to generate superior growth rates for the foreseeable future and that capital pools are enormous and/or expanding rapidly. In all three regions, information technology has contributed to better solutions for investors.

All this begs the question: what are the ten things that really matter for asset management in general, and investment funds in particular, in the Middle East?  The starting point must be that[1] capital pools in the region, which are already substantial, will continue to grow. Over the next decade, the Middle East will continue to be a major source of natural resources – especially hydrocarbons – for the rapidly developing economies of East and Southeast Asia. The Gulf Co-operation Council (GCC) countries that are running large current account surpluses thanks to exports of oil and gas will amass additional savings in Sovereign Wealth Funds. The corollary of this is that, like China now or Japan in the 1980s and early 1990s,[2] the Middle East is a natural source of investment capital for the rest of the world. Because the GCC currencies (and most others in the Middle East and North Africa) are pegged to the U.S. dollar, investors can invest in the U.S., Hong Kong and various other places, with minimal currency risk: in this respect, the Middle East has a huge advantage relative to China and Japan.

One implication of this is that the[3] Middle East is an obvious market for the distribution of UCITS funds that are domiciled in Luxembourg or Ireland. The UCITS funds are already in existence, and provide access to every conceivable asset class that an institutional or individual investor might need. The UCITS ‘brand’ is a trusted one and is synonymous with first class regulation and transparency. As is the case in Asia, there are local asset management companies in all of the GCC countries. Most are affiliated with local universal banks or other local corporate groups. However, very few have achieved the absolute size that would give them the economies of scale enjoyed by large asset managers in  the rest of the world. Therefore, [4] many banks in the Middle East are likely to come to the conclusion that there is more money to be made from distributing investment funds than managing them. This is what happened in continental Europe in the 1990s and what is happening in China now. Nevertheless, as the fragmented financial services industries consolidate over the coming decade [5] it is a near certainty that at least one very substantial Middle East based asset management company will emerge: its business will not be confined to one country in the region.

Of course, universal banks are not the only organisations that can embrace Open Architecture and seek to profit from the distribution of products that are sourced from other companies. Thanks in part to the development of health insurance, insurance premiums are rising rapidly from low bases in almost all countries in the region.  Within the coming decade, [6] Middle Eastern insurers will turn to fund distribution as their industry matures. It is also a safe bet that [7] the growth in Open Architecture will be accompanied by a strong increase in distribution of Sharia-compliant funds. Sharia-compliant banking and Takaful have had to overcome a number of challenges, but are growing rapidly in many GCC countries and in certain countries outside the Middle East, such as Malaysia. The decade to 2020 will probably be seen as the decade in which Islamic finance moved to the mainstream.

In differing ways, the governments of Dubai, Abu Dhabi, Bahrain and Qatar have all sought to promote their states as offshore financial services centres. That each has some control over local Sovereign Wealth Funds (and, often, other institutions as well) means that they have some ability to nurture a local asset management industry. This is a formula that the government of Singapore, for instance, has made to work well. However, unlike Singapore or Hong Kong, none of the Middle Eastern centers has access to a massive hinterland (like Southeast Asia or Greater China). The implication is that [8] the Middle Eastern centers will flourish, provided each focuses on a different niche, with the result that they can develop through collaboration rather than competition.

Financial services is, of course, not the only industry that regional governments are looking to develop as economies are diversified away from energy. Massive new infrastructure projects across the region will require innovative funding. [9] Infrastructure funds and other locally-focused vehicles could well be in the mainstream of the Middle Eastern asset management industry by 2020.

Finally, it is often forgotten that the Middle East and North Africa is home to well over 200 million people. In most countries in the region, people are poor and financial services under-developed as a result of structural problems. However, most countries are making some progress towards resolution of the problems. [10] In the next ten years a very substantial funds industry will develop in at least one of Egypt, Algeria and Morocco.

By 2020, the asset management industry of the Middle East will be much larger and more sophisticated than it is today.

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About Andrew Hutchings

Andrew Hutchings is Chairman and co-founder of Universal Copywriters (Uniwriters), a consultancy that works with global investment managers, private banks, institutional banks and publishers of commercial intelligence. He has written extensively on asset management, investment fund distribution and financial market infrastructure - in the Middle East, the Asia-Pacific and Europe. He has worked as a Co-ordinating Editor for Global Custodian and has extensive experience as a Research Editor.

Post Under: Asset Management


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