The Spence Johnson Blog

By Nigel Birch, 4 July 2017Market Intelligence | Investment Products

The Money in Motion Blog - EMEA – Q4 2016

Spence Johnson puts data and intelligence at the heart of successful institutional asset management businesses. This blog summarises themes identified by our Money in Motion dataset each quarter. Money in Motion collects data from over 100 Asset Managers globally and tracks over €7 trillion in Institutional flows. 

Across the EMEA region in Q4 we saw very different flow patterns driven by local regulations, unique client group ambitions and continuing pressure from the macro-economic environment. Active Fundamental equities continued to suffer with €26.7bn of net outflows across all client groups in EMEA, largely driven by UK DB Pensions who accounted for €5bn of these outflows. This trend was however countered by German Institutions who put $1.1bn of net inflow into 3rd party asset managers. Institutions also pulled Passive Equity money. The €4bn of net outflows was led by UK DB Pensions (€1.3bn net outflows) but conversely countered by Dutch DB who allocated €1.8bn of net inflows, and UK DC who allocated €0.3bn of net inflows. 

For more data on Q4 trends, please click on the link below

The Money in Motion Blog - EMEA – Q4 2016

We’ll be keeping a close eye on the changing shape of global fixed income in the next quarter, as well as emerging new product opportunities and the changing role of institutional investment consultants in next quarter’s blog out soon.

Thanks

Nigel Birch

Managing Director

Spence Johnson 

By Nigel Birch, 3 July 2013Market Intelligence | Insurance Asset Management

The growing opportunity for Europe Insurance Asset Managers

The European Insurance asset management market is complex, opaque, and frankly rather confusing – especially when seen through the eyes of asset managers.  We believe this does not have to be the case and have focused on demystifying this market and describing the growing opportunity that exists for asset managers.

It is generally understood that the insurance market is really very big indeed. The total assets of European insurance companies are €9.1 trillion. That is enough matchsticks, stacked end to end, to reach to the moon and back 500 times!

Importantly however, for those who are still reading and not already penning their business case, the total figure means nothing very much at all for asset managers. For this figure includes intangible assets, accrued income and debtors for example. A much more sensible figure for this market would be ‘total investment assets’. This definition puts the market at €8.5 trillion, but sadly this still includes life assurance assets, like unit linked policies, which despite their insurance wrapper are not ‘freely investable’ insurance assets at all. So, after we remove these too, we are left with ‘general account’ assets; a figure of about €6.3 trillion which probably most accurately describes the size of the European insurance asset management market today. 

More importantly, when presenting the opportunity for asset managers, just sizing the market is not enough. Large insurers often have affiliated asset managers who, while in principle could lose their affiliated client, don’t tend to all that often. Importantly these insurer affiliated asset managers tend not to outsource much to third party asset managers. Moreover, insurers also tend to invest a large proportion of their assets directly, by purchasing government bonds for example. When we get to the asset class level, liquidity is king in certain segments of insurance, making cash funds a significant part of an insurers’ portfolio. Long duration is also an important investment objective, especially for the life sector making fixed income products very popular across the market - especially in France where fixed income alone account for over €1.3 trillion. In fact each of the European markets has its own unique characteristics with quite different life/non-life splits and different asset allocations and regulatory frameworks.

The upshot is a smaller than expected revenue opportunity for asset managers which is already dominated by a few market leaders. Despite this, our new research suggests this is changing, and that recent drivers are increasing the opportunity for insurance affiliated and non-affiliated asset managers in the European market. 

By Nigel Birch, 28 March 2013Market Intelligence | Investment Products

The growth of Fiduciary Management in the US

For the last 5 years one of the major focuses of our firm has been the European Fiduciary Management Market.  In the US this market is generally known as the Outsourced Chief Investment Officer or OCIO market. This year we turned our attention to the US market with a research project called “OCIO Market Intelligence”.

The US OCIO market is made up of 3 slightly different offerings;  Full OCIO – a holistic and fully discretionary service, Semi-Delegated OCIO – a holistic service where client sign off is still required and Delegated Investment – where an OCIO provider focuses on only the investment element.

The total market size is currently $881bn and we predict strong three year growth across all three of these segments.  With this growth we are also seeing a maturation of the market as providers converge on what is starting to look like best practice for their target client segments (be that defined by size or type of institution).   Fee level and structures and becoming more consistent, service sets and specifications are becoming more aligned, Intermediaries are emerging and providers are aligning themselves more with their clients.

These trends will have an impact on every business operating in the institutional market. There will be winners and losers, but we see one clear winner emerging – Institutional Investors themselves.

The financial crisis and subsequent economic environment served to highlight the inadequacy of many of the institutional products and services. 

Providers were comfortable in a high margin low innovation environment. Detached advice, misaligned interests, lack of accountability, and underperforming products all contributed to challenging the long term sustainability of many institutional investors.

The response was a race for innovation amongst institutional providers to develop solutions aligned with achieving the long term objectives of their clients. This race has become the growth and development of the OCIO market and has dramatically increasing the competition within the institutional market.

This has not only resulted in better products and solutions, ones which are aligned with, measured against and responsibly for achieving the long term objectives of their clients. It has resulted in better value for clients as providers look to position themselves aggressively in an extremely competitive environment. Ultimately these things combined will result in better outcomes for institutional investors.