Fundquest looks for second generation efficiency
FundQuest, the fund selection arm of BNP Paribas, believe the financial crisis could prove to be both a threat and an opportunity for the sub-advisory business
The acquisition of London-based multi-manager IMS by BNP Paribas last year aimed to strengthen the French bank’s capabilities in this space, where it operates under the FundQuest brand.
By combining the quantitative analysis and asset allocation capabilities of FundQuest Paris with the strong track-record in manager and fund selection of IMS in the UK, the new merged group aims to win business from other players in the institutional and wealth management space, says Paolo Gianferrara, head of business development at FundQuest Continental Europe.
Moving on up
“We are today one of the top ten leaders in the multi-management space in the world and our objective is to move further up. We can do that only if we gain market share outside the BNP Paribas Group,” he says.
Before the merger, while IMS, now re-branded FundQuest UK, ran the majority of its assets for institutional clients, FundQuest Paris serviced mainly the firms within the group. The goal is to broaden the group’s client base, leveraging on the broader array of investment services now available within the firm, says Mr Gianferrara.
A full merger between the two investment teams either side of the channel took place last year. Around E11bn of the total E30bn assets that the FundQuest group manages at global level are sub-advised by external managers selected by FundQuest, or are funds selected by the firm for its customers on an advisory basis.
BNP Paribas AM is the biggest client of FundQuest in Paris. The assets sub-advised for the French asset manager have decreased by 35 per cent from the E1.2bn six months ago to E850m today, due to the market downturn and to BNP AM’s decision to internationalise some of its funds, says Mr Gianferrara.
“With the financial crisis, asset managers have been rationalising their fund range and looking at whether the rationale for delegating an investment strategy is still valid,” he says.
Fund houses may decide to bring back in-house products, where they have built up internal expertise over time, or merge funds to boost profitability.
“Those are threats to the sub-advisory business due to the environment we are living in,” says Mr Gianferrara. “However, there are also opportunities.”
Asset pooling
He believes in what he calls the “second generation of multi-management business”, defined by the concept of asset pooling, which enables clients’ to build portfolios more efficiently and with increased transparency.
“Asset pooling will help FundQuest to meet the evolving requirements of existing clients within our range of Irish domiciled funds, in addition to creating a more effective mechanism for managing other segregated, or manager of managers relationships within the broader group,” says Guy Davies, head of European equities at FundQuest UK.
“It will also provide greater scope to tailor investment solutions which should significantly broaden distribution capabilities,” says Mr Davies, who anticipates assets under management on their pooling platform will grow from the current levels of E300m to around E2bn by year end.
As there are managers that only offer segregated mandates, fund management delegation also broadens the universe of managers available.
However there are many more asset management firms that offer funds but do not run mandates. This is why Mr Davies predicts an increasing use of hybrid portfolios, made of both segregated mandates and funds at FundQuest, as they provide additional flexibility. “My first priority is to look for high quality managers, to be able to put them together to add value,” he says.
