This is probably the way a lot of intermediaries conduct portfolio construction, but that does not necessarily make it the right way.
Recent research from Fitch Ratings shows UK and US asset managers are more adept at establishing flagship funds, while European fund houses struggle.
Of the top ten players, classified as those with more than 25 cross-border funds and the highest proportion of flagships, only one is European, with all the others hailing from either side of the Atlantic.
M&G leads the table with 34%, or11, of its 32 cross-border funds classified as flagships (funds with at least €1bn of assets), while Pimco heads up the US asset managers with 29%, or 14, of its 49 cross-border funds achieving flagship assets.
|
Largest Players (More than 25 Funds) – Top 10 by Proportion of Flagship Funds |
|||
|
Asset manager |
Flagships |
Number of cross-border funds |
Proportion of flagships(%) |
|
M&G |
11 |
32 |
34 |
|
Pimco |
14 |
49 |
29 |
|
Vanguard |
6 |
29 |
21 |
|
Blackrock |
20 |
105 |
19 |
|
Franklin Templeton |
14 |
81 |
17 |
|
First State |
5 |
30 |
17 |
|
BNY Mellon Group |
11 |
69 |
16 |
|
Robeco |
6 |
42 |
14 |
|
Fidelity International |
23 |
176 |
13 |
|
Aberdeen Asset Management |
9 |
71 |
13 |
Source: Lipper, Fitch
Size is not everything
To reach the top of such a table means having a high proportion of large funds and as we know size does not always get you where you want to be.
It can’t be denied that M&G’s €9.3bn Recovery Fund, run by Tom Dobell, which is the fourth largest cross-border equity strategy, has got a stellar reputation. For this reason it is no wonder it is almost as big as Aberdeen’s €9.5bn GEM fund, which incidentally soft-closed earlier this year.
But when does a fund become too big? And is it up to the adviser to make a call on whether performance could be impacted even if the fund management group has not?
M&G has two other giant funds featured in the bond top 10 – its €9.9bn Optimal Income and €7.8bn Corporate Bond funds, both run by Richard Woolnough.
These have been favoured with significant inflows this year alone, as the appetite for fixed income strategies adding some alpha has continued to build.
Look beyond the inflows
The investment universes of these funds might be substantial enough to avoid liquidity issues from constricting performance, but it is a consideration that advisers need to be aware of.
Fitch’s report on flagship funds is interesting from a ‘who is the biggest boy in the playground’ perspective and also highlights those asset managers that have done well not to depend too much on one strategy.
But what it shouldn’t do is reinforce perceptions that bigger means better because intermediaries should know better than this.
Do you invest in “flagship” funds, as defined by Fitch above, what do you see as the risks and rewards of doing so? Use the comments box below…
For the full report, click here.
