Raiffeisen outsourcing based on track record

Assessing whether there is substantial client demand is the first thing to do before launching any new product, says Klaus Glaser, chief investment officer at Vienna-based firm Raiffeisen Capital Management. The dilemma is then to decide whether the firm has the ability to manage it in-house or should instead outsource it.

“If we believe it is not our core competency, or if we do not have sufficient research resources, then we will look for an external manager having an investment philosophy similar to ours.” It is new money that generally flows into sub-advised asset classes, explains Mr Glaser.

For the Austrian firm, which manages ?43bn in assets, it is important to distribute its own branded funds through its large captive network. “In the retail business, we prefer to set up our own entity (as opposed to buying funds), because of branding and distribution issues,” says Mr Glaser.

Employing external managers can be time-consuming but it generally provides access to an established track-record.

“Normally you are a little bit faster in launching the product in-house, because you save a lot of time in the process of selecting managers. But on the other hand, fund management delegation has the advantage that you can immediately offer your clients a product with a longer track-record,” he says. “This is true especially in the institutional business, when you launch a clone of an existing fund.”

Raiffeisen CM took the decision to seek external providers in the mid-90s, appointing Capital International to manage its global equity fund. Additional regional asset classes, including European, US and Pacific equities were later launched with the same partner.

But then, a number of factors, including Austria’s joining the EU in 1995, adoption of the euro in 1999 and Raiffeisen CM’s resolution to enter the game of international third-party distribution drove the firm to review its geographical areas of expertise. European equity was brought back in-house. The remaining mandates awarded to Capital International, which are today worth ?1.2bn, have been managed by the firm until very recently, when concerns on the manager’s performance led Raiffeisen to appoint a new firm, Investec Asset Management, due to start in July. Raiffeisen also employs Wellington Management for sector equity funds, emerging markets equities, emerging market bonds, and also global equity. AIG and K2 Management manage for the firm hedge fund mandates for ?700m in total.

Klaus Glaser, chief investment officer, Raiffeisen Capital Management