A mark of the changing face of the funds industry is shown by a prediction that flows into sub-advised funds in Europe could reach €200 billion by 2020.
According to Jag Alexeyev, founder of Impactvesting, the firm which carried out the research, said that sub-advised funds have grown by 17% per annum since 2010. This compares to 13% for the entire European fund industry and Alexeyev predicts that the pace of sub-advised funds will grow in the coming years.
The firm’s report, ‘Opportunities in European Sub-Advisory’, says that an increasingly diverse group of financial institutions are using sub-advisors. These include domestic banks, cooperative credit institutions, financial advisor networks, pension providers, insurance companies, and emerging wealth managers.
It goes on to say that higher reliance on sub-advised solutions will coincide with continued strong demand for investment funds in Europe. This is due to macro conditions including negative interest rates which should encourage further migration of assets from banks into higher yielding products such as funds. These can include non-traditional and unconstrained income strategies, multi-asset solutions, dividend equity, and alternatives.
“Ucits and other long-term funds in Europe will attract around €1.8 trillion of net flows in the next five years, with sub-advised funds accounting for 10% to 12% of the total,” said Alexeyev.
However, he added that changes in demand and investment packaging raise the bar for traditional sub-advisors due in part to the growing use of passive instruments.
Impactvesting said that in its research 75% of the funds and more than 80% of assets covered in the report have not been identified as sub-advised products in other widely used global fund databases.
Vanguard recently launched four active funds that utilised sub-advisers.
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