Pave way for independent’s day

Unless fund selection is conducted professionally and independently, by a dedicated team or company, economic factors can interfere in the selection of managers and products. “In an extreme model, where distributor takes the total control of the selection process, interests of bilateral agreements, also based on cost, can prevail,” said Eugenio Namor, chief executive officer at Eurizon Capital, previously Sanpaolo IMI Asset Management. Mr Namor’s company has ?7bn in third-party funds, representing only 5 per cent of the total ?130bn worth of assets. Funds and managers are selected by a multi-management team, which has access to the fund supermarket Allfunds. The importance of having an independent unit dedicated to the selection of funds was strongly affirmed by Marc Raynaud, global head of mutual fund distribution at BNP Paribas Asset management. In 2005 the French group took over the American company FundQuest, which specialises in manager selection and in the packaging of investment solutions distributed through banking networks. At the same time in Europe, the four existing teams dedicated to manager selection in the private banking business, in the insurance business known as Cardif, in the online broker Cortal Consors and in BNP Paribas Asset Management were also re-grouped as a single company, under the FundQuest banner. While the American company specialises in picking American managers and funds, the European company focuses on the selection of managers and funds in Europe and Asia. “The teams selecting the manager do not worry about the price, as it is a separate team that is in charge of negotiating costs,” said Mr Raynaud. This way the selection of external managers and products is not linked to any purely economic reasons, he said. In Parvest, the Luxembourg-based open-ended Sicav fund marketed by the group, 10 external managers are employed on a white-label basis and are selected by FundQuest.

	Raynaud: specialised managers should not undersell products
	Bagiotti: price trend is not linked to alpha generated by managers

Cost is certainly an important factor in fund and manager selection, but it cannot become the dominant reason, said speakers at the conference. More important is being able to distinguish between the cost for purely replicating market performance and the cost of active management, given volatility. “Cost is also linked to the investment style,” said Attilio Ferrari, chief executive officer at fund house Arca. “And can be very different depending on whether you are asked to generate alpha through two fundamental choices per year or by modifying the portfolio weekly, staying like the surfer on the crest of the wave.” The consolidation of asset managers and the increased competition, also from Exchange Traded Funds (ETFs) is causing a fall in the level of commissions of asset managers, added some speakers. Sandro Pierri, chief executive officer at Pioneer Investments in Europe, stated that commissions are not a competitive factor as much as they were five or six years ago. “Aggregators in the market are equalising the level of commissions. Quality of products and distribution approach make the difference.” Pioneer may as well be one of these aggregators, with presence in 19 countries, with 60 per cent of assets are managed outside Italy and 40 per cent of the assets are distributed through non captive channels, said Mr Pierri. Giovanni Bagiotti, director of wealth management at Mediolanum, said the activity of renegotiation is very important in his firm, where 80 per cent of funds are managed by third parties. “The price trend is not linked to the alpha generated by the managers but to the number of investors demanding super-active managers or alleged super-active managers, and by the recent performance of the industry,” he said. A large part of the increase of the average cost of management, when assets are bought in bulk as happens with groups like Mediolanum, said Mr Bagiotti, derives from the recent good performance of the market, from which some managers have benefited. Mr Raynaud at BNP Paribas Asset Management stated that while prices for beta-led products offering little added value, such as ETFs or funds close to the benchmark, prices of products managed by boutiques are increasing. “Specialised managers have a investment style that is very specific and do not want to undersell their products.”