Subadvised Mutual Funds Continue to Gather Flows in Europe Despite Market Volatility
June 28, 2023 — London
The subadvisory model is gaining traction in 2023 after last year’s contraction in assets
Following several years of asset growth and positive net inflows, in 2022 European unaffiliated subadvised mutual funds suffered the negative effects of market volatility at the European and global levels, which translated into a decline in assets. However, the outlook for subadvisory model has brightened in 2023, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.
During the first four months of 2023, the region’s unaffiliated subadvised mutual funds gathered net new inflows of €32.9 billion (US$35.7 billion) after having collected €121 billion of net inflows in 2022 and €171.8 billion in 2021. Despite the positive flows, the assets under management (AUM) of such funds remain below the peak registered at the end of 2021, when they stood at €1,210.2 billion.1 The main driver of demand at the fund sector level in the first four months of 2023 was global equity, which gathered €5.1 billion in net inflows. At the end of April, nearly half (49.8%) of European subadvised assets were allocated to equity products.
Looking ahead, one-quarter (26%) of the asset managers across Europe surveyed by Cerulli in early 2023 expect European equity to be the most in-demand sub-asset class over the next two years; 24% of respondents believe global equities will be most popular and 21% expect US equity to see the strongest demand.
“Cerulli’s research shows that the timeliness of managers’ responses to ad hoc requests and regulatory reporting is fundamental to nurturing a good relationship with sponsors,” says Fabrizio Zumbo, director, European asset and wealth management research at Cerulli. “Sponsors tend not to change subadvisors easily, but they are increasingly focused on preferential fee structures and high product, service, and operational quality standards.”
Zumbo says that to win new mandates, subadvisors need to demonstrate that they are superior to their competitors—on price and client service. In addition, they need to have a robust IT infrastructure and dedicated staff to enable them to provide timely responses to their partners’ information requests and ad hoc regulatory reporting.
The subadvisory market in Europe remains less concentrated than other segments, with the top-five subadvisors in terms of AUM accounting for just 21.7% of the overall market.2 The industry is growing at different rates throughout Europe, with the UK, Italy, and Switzerland the largest markets in terms of AUM at the end of 2022.
1 Source: Broadridge
2 Source: Broadridge
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