The two keys to asset management success

Asset management is once more in the ascendancy, with favourable markets playing their part. Merrill Lynch Investment Managers (MLIM)has announced record profits, boosted by retail distribution. While Goldman Sachs has warned its investment bankers against over- exuberance, and told them to be more selective in terms of which deals they back, its asset management division, GSAM, is going from strength to strength. And as the Standard Life Assurance Company gears up for its summer demutualisation, it is becoming apparent that asset management is the most profitable arm of the entire operation. The top brass at Standard Life Investments (SLI) in Edinburgh clearly want to leverage their performance by distributing products in more European markets. Significantly, both GSAM and MLIM are major players in the sub-advisory world, and SLI has ambitions there too. A successful asset manager in the retail and wealth management space needs at least two strings to its bow. As well as being able to sub-advise on non-core assets, it needs to have a product range which will facilitate ‘preferred provider’ status with banks moving towards guided architecture. Merrill has managed to gain a number of such partnerships, mainly through having a blockbuster natural resources product, which has generated huge interest among distributors. GSAM is moving further into the bank distribution space, having launched a deep range of Ucits III compliant funds, previously only available to institutional clients. At SLI, most successes to date have been in the institutional arena, but as a partner of a life company, it understands better than most the challenges of retail distribution. It has launched a multi-manager structure and wants to use this as one of its platforms for European expansion. That is not to say that the sub-advisory business means easy money in Europe. Latest research from PWM, published in our special supplement, shows sub-advisory will continue to grow in Europe. The UK market is one with a great deal of momentum. Multi-management has become popular in France. It is politically unacceptable there to sell rivals’ funds over a bank branch counter as the Germans do. But in certain markets such as Spain, where sub-advisory initially looked like an attractive solution, when Santander began to outsource non-core assets, the trend is almost negative. Spanish banks are finding the process of due diligence, appointment of mandates and transfer of assets a cumbersome one. Spanish distributors are preferring direct distribution of third-party products through open architecture platforms such as Allfunds Bank. One way or another, clients are getting more access to the best solutions in the market. But asset managers need to take heed of distributors’ needs when they put together not just their product menu, but their business strategy.