The key to penetrating foreign fund markets is taking the time to build relationships and a locally established brand. Apparently it’s all about drinking coffee; which conjures up charming images of cafes around Munich’s Marienplatz or the old town of Salzburg. The reality is more about longevity in the market, building processes and speaking the language.
Up for grabs is the €6.6tn European retail fund market which grew 9.1% in 2015 and offers interesting opportunities for international expansion by European and global companies.
The following chart, from the Platforum European Fund Distribution update which we published this week, reveals the extent that individual countries are dominated by a small number of fund groups. Those with the lower levels of concentration have more open architecture distribution and provide more scope for foreign funds.
What we see is that the UK and the international cross-border markets have the lowest concentration levels. Distributors are more open to third party funds in these markets, which are also the largest individual markets. In fact the UK platform market now stands at €640bn, of which €470bn is in funds.
For global fund groups the UK is often the starting place with the advantage of English language spoken and with British regulation and legislation tending to run ahead of, and influence the direction of European rule making. The huge impact of the RDR is already a known quantity and the implementation of MiFID II may well be less of a shock as a result.
As well as the UK, our first report covers Germany and Austria and these two markets have a number of characteristics that warrant a different approach to distribution. Of course the main observation is that universal banks on the continent are the primary distribution channel with substantial tied sales forces and often their own asset management divisions. However, fund selectors influence fund flows more than in the UK. The 1,200 German Vermoegensverwalters (wealth managers) and their Austrian equivalents (Wertpapiervermittlers), are impartial and open to new ideas as long as they are supported by robust processes. Similarly, the smaller private banks are less likely to have internal asset managers or rigid preferred partnerships in place.
We’ll be debating these trends with subscribers to the research and heads of strategy and distribution from asset management companies and platforms at the Platforum European Fund Distribution Seminar on 24th May in London.
If you want to talk to us about European opportunities, do get in touch – we’ll provide the coffee in a not-so-sunny London square… or a nice cup of English tea!