In Flexible Allocation Flossbach Von Storch’s Multiple Opportunities fund returned an impressive 5.8 per cent during the past year and attracted over €1.8bn in net sales. The manager has a number of qualities that could enable its fund to be the next blockbuster of the European funds industry. It is one of the very few German boutiques with a high quality offering and ambitions to grow beyond the borders of its home country. The manager is on a large-scale recruitment drive and is signing new distribution agreements to help it grow in Spain, Italy and France.
Other funds of note include Nordea’s Stable Return fund which attracted flows of €9.2bn in the past year and returned 6.18 per cent (by oldest share class). Using its international proprietary bank distribution network and strong performance as a springboard, the Swedish manager succeeded in making its fund one of the most popular in Europe, with AUM of €17.3bn. It attracted strong sales in Nordic countries, Southern Europe and Germany. The manager is now attempting to penetrate the UK.
The fund’s investment philosophy has been well-suited to the market environment of the past 12 months as it is based on equities with minimum volatility. The manager needs to prove that its performance will not decline when conditions are significantly different.
Some fund managers have performed well over the past 12 months but have failed attract inflows. A notable example is BNY Mellon’s Real Return, another multi-strategy liquid alternative fund. The fund returned 9.3 per cent but it posted outflows of €670m. JP Morgan Global Income fund (Moderate Allocation) returned 5.7 per cent but suffered outflows of €105m. Clearly performance does not always result in strong sales.
It is true that performance is much harder to come by these days. Data on balanced portfolios of US equities and bonds (60 per cent to 40 per cent) shows a performance of 14 per cent between 1991 and 2000, 8 per cent between 2000 and 2007 and 6 per cent from 2008 onward. In these deteriorating circumstances managers should be reviewing their charging policy. Charges are an integral part of performance and will be increasingly scrutinised. Managers are slowly waking up to that fact and have lowered their charges.
The average ongoing charge for a multi-asset vehicle in the UK market is now 1.18 per cent compared to 1.34 per cent two years ago, based on the relevant categories by the Investment Association. There is reason to believe that charges can drop further still, not only in the UK but on the Continent too.
