The battle for winning new assets is as competitive as ever with more and more asset managers using data and business insights to understand the market and position their funds to investor and consultant clients. Nearly 300 investment managers from Europe and the UK joined eVestment in London for our second annual European asset management conference to learn how they can use data and intelligence to stand out in a competitive marketplace.
Effectively Using Competitive Data & Intelligence
Christophe Frerebeau, Head of EMEA for eVestment, kicked off the event with a presentation on how asset managers can best make use of the competitive intelligence available on the eVestment platform.
“The asset management industry is going through a transition,” Frerebeau said. “Like many industries, some will be left behind and others will move ahead. Using data and competitive intelligence can help you stay in the driver seat.”
Differentiation is key, he said. “You have to make sure you are playing to your strengths. You can try to guess those strengths, or you can use the data to analyze and understand where you are different.”
He shared insights into how asset managers can use market trends and data to:
- Gain an understanding of the competitive landscape
- Understand how products are being perceived by consultants and investors
- Identity relevant opportunities for prospecting
- Better position products for success
- Be ready to act when opportunities arise
“It’s fantastic information,” Frerebeau said. “If you were the head of sales or the head of marketing in another B2B industry, you would be dreaming to have as much intelligence about your market as you have today in the institutional market.”
“From being able to plan your revenue based on forecasting, to be able to have a place where you can market your product, showcase your product and know what’s happening, to understand the perception of your clients and prospect, and, being able to understand not only what your competitors do, but also what your clients’ decision-making process is. Being able to look behind the curtain and understand, ‘how did they make their decisions?’ And then being able to compare your own process to it. How fantastic is that?”
The Value of Active Management
Maksim Dimitrov from eVestment hosted a panel session on how the role of active management has changed. Joining him was Nicolas Moriceau, Head of Consultant Relations for BNP Paribas; Bastiaan de Kreij, Senior Investment Consultant, Head of Fiduciary for PGGM; and Åsa Norrie, Head of European Sales for Standard Life.
Is Active Management Dying?
“All we hear in the media today is that active management is dying,” Dimitrov said to start the discussion. “There’s no opportunities and active management is less than a zero-sum game. While many would believe those statements, the reality remains that more than $20 trillion are managed by active asset managers today. At the same time, it is undeniable that passive investing has increased in popularity and the momentum there is big, which has put pressure on active management.”
Panelists agreed that active management is still generating higher returns in the long term, but that it takes educating investors on better understanding what a strategy will deliver. “Active being out of favor may be a short-lived cycle,” said one panelist. “I think people tend to have a short-term memory. Yes, it’s been tricky for a lot of equity asset managers, but we should look at the long-term picture and give time for managers to deliver. If you look at time horizons up to seven or 10 years, active management has actually generated a lot of alpha in a number of asset classes. People have to understand – and maybe it’s on the sales/marketing side where we need to do a better job – so that people know when to expect our strategy to deliver.”
“I think that’s where our role comes in,” said another panelist. “We need to make sure that that board of trustees understand what they buy in the first place. Particularly when it comes to private markets or less liquid vehicles. Make sure they understand what they are buying in the first place, so when it comes to your annual review, with in front of that board of trustees, you again remind them of what they have asked you to deliver and then you can manage their expectations. Because otherwise, you get yourself into a trap.”
Rising Popularity of Impact Investing (ESG)
Another topic discussed by the panel included the rising popularity of “impact investing” from a sustainability aspect. “Younger investors caring more about the responsibility of the future of the planet – not just solely on returns,” one panelist noted. “I believe there is a lot of room for asset managers to show they can add ‘societal alpha’ and that there is a benefit to giving leeway to a manager to select assets that add something to the portfolio from a different perspective.”
How to Demonstrate Value Added
Panelists also gave some advice on how asset managers can demonstrate their added value. “None of us can be that arrogant that we think our fund and our solution is the best on the planet,” said one panelist. “Long gone are the days of product pushing. Now it’s very much a partnership and providing solutions to problems.” Another panelist agreed. “It’s about getting the right understanding of the client’s beliefs and objectives, editing yourself and your service. Remain humble and play to your strengths.”
Manager Research and Selection
Jerrod Stoller from eVestment moderated a discussion with Willis Towers Watson’s Luba Nikulina, Global Head of Manager Research and Oliver Jaegemann, Global Head of AMX, where they talked about their approach to manager research and selection.
Start with Data
Nikulina said their team covered most of the asset classes available, but that they were always looking for new ideas. “Sometimes an asset manager will reach out to us asking, ‘is this product something of interest?’, and if it is not in our database yet, then we immediately go to eVestment and look at what data is available to do the initial screening and scoring of whether we should be taking it to the next stage. The vast majority of our pipeline comes in this way.”
“If we get serious and see real potential in the strategy, then we try to leave no stone unturned doing due diligence,” she said. “There will be a lot of desk work and quantitative work.”
Get to Know the Team
Nikulina said the next stage in their process was face-to-face meetings with various members of a management team to get to know the dynamics of the team. “This is one of the most important criteria for us when we are trying to assess the potential of the particular manager to get good returns in the future.”
Further Due Diligence
After that is a discussion with the investment committee. “At this stage there will be, what we call a ‘devil’s advocate’ where a senior person will be assigned to look for all possible holes in the due diligence. So, if we keep coming back to you with additional questions at this stage, where you thought we were already done, then that is what we are doing – looking for potential weaknesses.”
Creation of Alpha
Transparency, fees and the creation of alpha have been widely reported in the media. Nikulina said it had been difficult in the last few years for alpha generators to find opportunities because the market was flooded with liquidity and there was so little volatility, but that was changing. “When we speak with clients, our advice is much more tilted to protecting downside and looking for more opportunities for alpha because the market environment is much more conducive for it.”
On fees, she said she felt like the industry had gotten out of balance regarding how much alpha went to end users versus to the people who generated the alpha. “Obviously, there should be a fair compensation for those who create alpha, who are out there looking for new brilliant ideas, but when they take away most of the value created, it’s just not sustainable.”
Both Nikulina and Jaegemann agreed that transparency from asset managers was a “given” for them. “If there is no transparency, we just walk away,” Nikulina said. And as alternatives, especially private markets, become more popular, they have had to adapt their research strategies. “It almost feels like a continuous change. Especially in private markets, maybe because of the nature of the asset class. It just feels that there is always something going on and we need to change and adapt.”