We talk to lots of fund managers who are trying to get a handle on how distribution works across Europe. The five major platform markets in Europe are made up of €561 billion as at the third quarter of 2011 in open architecture mutual funds – so it’s a big market to make a play for.
Fidelity owns Germany’s Frankfurter Fondsbank which makes this group the dominant platform parent across Northern Europe. Combined UK and German assets total €56 billion (£46 billion). Allfunds rules the roost in Southern Europe with total assets of €55 billion. The 25 UK platforms targeting IFAs come in many different flavours and can be hard to get a handle on – but look to German and Italian platform markets, for example, and these models are worlds apart.
Whilst UK and German platforms are typically built for individual adviser users, Italian platforms will service large institutions. As fund managers, you won’t be negotiating with most platforms in Italy (excepting Allfunds), you’ll be negotiating directly with the distributor. These Italian platforms act as paying agents so they are the big global names you’d expect – State Street, RBC Dexia, BNP Paribas, to name a few.
Platforms and centralised investment processes go hand in hand. In the UK and Germany, models and discretionary management are on the march. Germany’s so called RIAs (registered investment advisers) are discretionary advisers and given much more credibility than the somewhat meanly nicknamed ‘white socks advisers’, or IFAs who will typically congregate in ‘pools’ or networks. In Spain and Italy, it’s been a story of fund-of-funds and GPFs (Gestione Patrimoniale in Fondi). But these worlds are coming slowly together as IFAs emerge on the continent – and the UK adviser population starts what we see as a largely inevitable move to a restricted model.
French platforms have been institutional in focus and started from a very narrow position of offering asset manager legal and commercial services only. Providers have joined the platform party and started to build fuller platforms for the emerging IFA market – these providers include Axa, Cardif and Skandia, amongst others. Moving south to Spain, it’s historically all been about banks but there are some early castanets heralding change. Last year there were only about 80 registered IFAs in Spain, but hey, it’s a start. (blog continues below)
Don’t confuse the continental IFA channel with the whole-of-market historic focus of UK IFAs. Guided architecture is the emerging name of the game and the days of having hundreds of dormant funds on platforms are over.
Is a pan-European platform a distant dream? Well, not really – Allfunds, RBC Dexia and MFEX are examples of what we call international platforms operating in many jurisdictions. This is, of course, not as easy as it sounds and a single global agreement and a single strategy for distribution across Europe is unlikely. But things certainly look more similar than ever before so there is hope!
Any fund managers wanting a single research document which explains distribution in major European markets, identifies the different platform models, the major players and assesses future trends and pricing, should have a look at http://theplatforum.com/european.
Holly Mackay is managing director of The Platforum.