‘Special one’ may be on your doorstep

Is it time to re-assess the concept of the “special relationship”? European asset managers are generally observing two distinct distribution strategies. The first is targeting global distributors such as UBS and Deutsche Bank. This is a strategy followed by some of the biggest fund houses, including those at Goldman Sachs and BlackRock, who maintain the pulling power to attract big wholesalers. That is not to say this attraction comes as standard. It is something they need to work at, in terms of quality of products, service and creating the correct mentality. It is one thing to brand a raft of forward-looking products with a Ucits III stamp and to engineer their innards to allow the most sophisticated use of derivatives allowed for cross-border distribution. It is another, far rarer achievement, to make the transformation from an institutional to wholesale retail distribution mentality which the global powerhouses increasingly require in their manufacturing partners. The second distribution strategy is to tie up with the likes of HVB, Natixis or Standard Life. These are not global operations – not yet anyway – although they have certain pretensions. They can perhaps be described as “national champions”, which is the label given to them by the distribution department at UK funds firm F&C. They are perhaps an ideal home for second-tier houses, for groups with a clear strategy, but without the strength of brand to be automatically selected onto the ‘guided architecture’ panel by the world’s largest banks. The irony is that, in pursuing the national champions, fund houses can often develop a stronger partnership and achieve greater eventual sales. Groups may be desperate to get onto the global funds roster for Deutsche Bank. Yet how many of the nine or so groups whose funds are officially distributed by the bank have actually achieved any commercial pay-off from the relationship? The Baer case The latest thinking is that you should hedge your bets, and don’t ignore the outlets on your doorstep. GAM, the multimanager hedge funds arm of Julius Baer has been an interesting case study on the efficiency of various channels. Its 2007 results were pleasing to the bank and its congratulatory analyst community. Yet internally created asset management products, and those coming under the wing of a specialist manufacturing unit are very much in the minority among Julius Baer’s private clients. This is soon likely to change, if management has anything to do with it. And during this change of direction, Baer’s asset management arm carries on enjoying another relationship – a special one – with UBS.