Aberdeen Asset Management is likely to keep most of Deutsche Bank’s institutional clients in the UK once its acquisition deal is completed.

Credit Suisse Asset Management (CSAM) has laid out its vision for the future of fund markets across Europe.

Speaking in his keynote address to the Fund Forum conference in Monte Carlo, CSAM’s vice-chairman Bob Parker described a shift away from old-style balanced management to specialist mandates, an increasing demand from institutional clients for advisory services and the growth of open architecture platforms associated with mutual funds.

Pension assets under management in the Asian-Pacific region could grow from current the €1,100bn to €2,900bn in 2015, according to a recent study by Allianz Global Investors (AGI).

As governments in the region push pensions reforms, the opportunities for asset managers wanting to gain market share in Asian countries are huge.

“Asia faces even more dramatic demographic changes than Western Europe,” said Johann Goldbrunner, member of the board of AGI. He added that the current 10 per cent depency-ratio in the region could go up to 27 per cent by 2050, with some countries facing demographic ratios of nearly 70 per cent.

They have been called “locusts” by a leading German politician. Their regulation has even been on the agenda for the G8 summit in Edinburgh, as if our political leaders did not have more important issues to discuss.

To some people, hedge funds are public enemy number one, to others they are the best thing since sliced bread, according to Tom Brown, a partner at KPMG and co-author of a study which canvassed the views of 550 executives in 35 countries involved in hedge funds.

“Life is clearly getting much more difficult for hedge funds, but they really are here to stay,” said Mr Brown, presenting his report to delegates at the Fund Forum conference in Monte Carlo.

JPMorgan Chase’s decision to call time prematurely on its collaboration with Schroders over development of a new operating platform to support Schroders’ UK investment operations, provides fresh evidence that outsourcing may not offer the panacea some have claimed.

Further growth in the importance of the Asia-Pacific region as a destination for investments has led to increased activity in the area from stock exchanges and trading platforms.

The French finance ministry’s decision to announce new tax breaks for small and medium-sized companies (SMEs) opting to list on Alternext, the fledgling market of pan-European stock exchange operator Euronext, has been designed to provide more long-term value for institutional investors.

UBS GAM is keen to address profitability issues through structural reform rather than involving itself in the latest round of mergers and acquisitions.

The summer of 2005 has been full of financial stories, which will have a lasting impact on the way investments are managed.

A series of mergers and acquisitions has straddled the annual Fund Forum event held in Monte Carlo, where structural issues affecting the world’s asset management community are typically discussed.

Ayaz Ebrahim believes there are three keys to stock-picking in Asia – throwing away the benchmark, local knowledge. . .and a degree of scepticism. He talks to Paula Garrido.

With markets operating in a low nominal return mode, trying to outperform benchmarks doesn’t seem to be the most attractive strategy for investors seeking absolute returns. According to Ayaz Ebrahim, chief investment officer of Asian-Pacific equities at HSBC Investments, this is particularly true in Asia where inefficient markets makes it possible for a stock picker to find hidden gems to invest in.

While initiatives to boost the institutional investment market in Spain have failed to deliver, Fonditel – the country’s biggest independent pension fund – continues to attract the big names through its impressive track record. CEO Luis Peña Kaiser talks to Paula Garrido.

In the last few years there have been two developments in the Spanish pensions industry, which many believed would drive real growth in the sector. First came the legal requirement for companies with pension assets in their balance sheets to externalise them via a pension fund or insurance arrangement. Then the possibility arose of creating pension plans for civil servants that could open the door to the establishment of industry-wide occupational pensions.

So far, neither of these developments has translated into real growth in the still underdeveloped private pension markets.

The resounding “non” that the French gave to the European constitution was the latest evidence of a pan-European revolt against established politicians. It was symptomatic of a growing desire by voters in those countries that founded the European Union – France, Germany, Italy and Holland – to teach politicians a lesson.

They want to punish the governments and institutions that have failed to deliver employment and economic growth. This has significant implications for financial markets.

If these governments have any instinct for survival, going forward they will prioritise maximising growth and minimising unemployment.

The two most important global trends of the last two years have been the rise in oil prices and the continued decline in long-term interest rates. One could argue that both of these developments are indicative of a negative global economic outlook.

Higher oil prices are a drag on growth in western oil consuming economies while lower bond yields suggest a medium-term outlook of low growth and deflationary risks. However, a positive spin is also possible, based on the fact that there is a common influence on both developments – Asia in general and China.

China’s rapid growth is based on the shift of labour in its rural sector to the urban-industrial economy.

The history of foreign investment in Latin America is strewn with examples of political crises leading to economic turmoil, devaluation, and debt default.

Over the last 20 years a dramatic political transformation has occurred as democracy has taken root across the region, replacing unstable dictatorships with governments that have widespread popular support. In some cases, these governments have nourished the institutions that promote economic growth and investment, for example independent central banks and private sector pension schemes.

Faced with a demographic problem, fiscal policy tightening and an inability to reflate the economy, the outlook for Japanese government bonds over the next three to five years looks cautiously optimistic as global low real interest rates seem set to continue.

This will primarily be driven by the ‘Bretton Woods II’ arrangement (whereby Asian central banks invest their savings in treasuries to finance the US current deficit).

Japan’s incentives for maintaining this deal have been its weak domestic banking sector, the zero per cent boundary on nominal policy rates, and the asset deflation over the last decade.

Currencies of commodity-producing countries have proven the most attractrive to speculative buyers, says Neil Mellor.

The Dutch pensions industry is coming to terms with the effects of the FTK legislation, which include volatile liability valuations, long-dated bonds demand and a switch to DC. Elizabeth Cripps reports.

Financieel Toetsingskader (FTK), the legislation due to come into force at the start of next year, will force Dutch pension funds to focus on their liabilities, with inevitable consequences for asset allocation.

Under the new rules, funds calculating the reserves needed to meet pension obligations will have to use the effective interest rate given by the swap curve (0.05 per cent above the government bond rate) as the discount factor, rather than a fixed actuarial interest rate of 4 per cent.

The ‘smoothing mechanisms’ of current accounting standards have come under fire following a failure to match lower liabilities despite a significant improvement in investment performance, says Henry Smith.

As sub-advisory continues to sweep through Europe, France remains split between proponents and opponents to the trend. Geraud Dambrine discusses why this market is being seen as one of the hottest growth prospects.

“Outsourcing asset classes to external sub-advisors is a sign of weakness.” This is quite a bold statement, yet one which often dominates the mindset of some Continental European circles.

Research conducted by l’Agefi, in association with Goldman Sachs1, shows that in France the concept of outsourcing draws mixed reviews – not just in terms of what motivates institutions to outsource in the first place but also what factors are considered when choosing a sub-advisory partner.

With its aim of providing long-term capital appreciation through undervalued US equities, Legg Mason’s Value Trust has outperformed the S&P 500 Index for 14 years. Roger Aitken delves deeper.

Interest rate swap trading via electronic platforms may be in its infancy, but recent signs point to a bright future as well as sizeable cost savings for execution, Roger Aitken reports.

While many believed it would be simply a matter of time before the interest rate swaps (IRS) market reaped the cost savings from online trading as the equity and bond markets had done before it, the eagerly awaited developments seem finally to have come into fruition in the past year. Today, electronic trading of interest rate swaps is comparable to a plane speeding down a runway almost ready for take off.

Some believe that electronic trading platforms have merely split the market electronically, but new protocol could offer integration and see increased adoption, says Simon Hildrey.

Buy-side asset managers in the fixed income market have benefited from the growth in electronic trading platforms. They provide both transparency and liquidity but this is only part of delivering straight through processing (STP) for asset managers.

Electronic platforms act as an intermediary between asset managers and fixed income dealers.

Can automation plug the leak in corporate action events that is costing millions every year? Though it has been widely taken up, there is still a lot of work to be done, writes Simon Hildrey.

The asset management industry loses millions of euros every year through failures in processing corporate action events. There has been progress in implementing automation but there is still a long way for the industry to go.

There are different levels of risks to asset managers from failures in processing corporate actions.

Higher than expected costs and complexity have provoked some negative responses to outsourcing, but as managers are faced with an ever-increasing list of regulatory requirements, outsourcers must invest in a viable technology solution while attracting and retaining clients, says Gerry O’Kane.

As if to destroy a few more cogs in the troubled outsourcing machine, Schroders is to receive £20m (€29m) from JP Morgan after the two announced their five-year custody and fund accounting outsourcing project was over. The word failure was never mentioned, but the “operating models are no longer sufficiently aligned”, according to Schroders.

With so much focus on consolidation of stock exchanges in Europe, perhaps more thought should be given to consolidating the post-trading infrastructure before any further moves, writes Roger Aitken.

In September, and precisely five years after the iX merger between the London Stock Exchange (LSE) and Deutsche Boerse (DBAG) was canned, the UK Competition Commission’s final report into the anticipated acquisition of the LSE by pan-European stock exchange operator Euronext and its rival DBAG, will be published.

In order to cut down the cost of post-trade inefficiencies,market professionals must embrace an internationally tried and tested standard data format, writes Ignace R. Combes.

The transformations that have occurred and continue to mould the clearing andcurrently in the limelight as market professionals have come to realise that post-trade inefficiencies are expensive, risky and worth addressing.

Investment funds are the only asset class not to have tackled the very real threat of settlement risk and it is an issue that must be addressed if the industry is to develop, writes Bruno Zutterling.

The European investment fund industry may well be smiling again now after recovering from the slump following 9/11. Assets under management are rising nicely and generally demographics are pointing the way to a good future. But hidden below the surface is an industry issue which could threaten every aspect of the industry unless a solution is found.

The Nordic region has set a good example of infrastructural consolidation in its stock exchanges, having utilised cutting edge technology to produce standardised trading rules. Driving the industry further forward is a desire to remain competitive with Europe and the US, says Roger Aitken.

The pace of infrastructural consolidation and the development of technology-led trading tools in the Nordic region has been relatively fast-paced when compared to a number of other European countries.

NOREX was the first stock exchange alliance in the world to introduce a common trading system, harmonised trading rules and membership requirements.

The rise of cash management and treasury solutions combined with an increase in institutions’ spending on technology has opened the door for new outsourcing opportunities, writes Gerry O’Kane.

One could be forgiven for thinking that in the current low-interest rate environment, cash management and treasury solutions would be way down the list of considerations for institutional investors. In truth, both pressures on technology and regulatory issues have seen a boom in the industry.

In the past couple of months, announcements from large industry players show a further expansion of outsourced treasury management solutions are expected.

In these current lean times, trustees are realising the importance of transition management in cutting costs and reducing the risks associated with changing strategy, writes Christine Senior.

Transition management is on the rise, with more and more new providers entering the market to challenge the long-established players and grab a share of increased business. The current investment climate has had a major impact. The double digit investment returns of the 1990s meant trustees and guardians of assets were less concerned about cost cutting when managers were comfortably beating their benchmark.

Alex Johnstone identifies the many catalysts for investment structure change and the benefits of selecting the right transition manager to facilitate the activity.

There are many events that drive institutional investors, such as pension funds, to change their investment managers or investment portfolio structures. The three most common ones are:

The design of an appropriate trading strategy is one of the key skills of a transition manager. John Minderides examines the different methods of assessing performance.

Performance measurement and transaction cost analysis can often be confused when assessing the qualities of a transition.

Performance measurement is used to measure fund returns over a period, usually relative to a benchmark.

In figure 3 we plot the actual fund value. Before the transition this is equal to the legacy portfolio, during the transition, the actual fund value is calculated as the value of bought assets plus the value of residual holdings to be sold. For ease of observation the relative performance versus the legacy portfolio is also shown.

As the demand for the services of transition managers has increased, so too has the number of new players, but the more diversified and well-resourced will prevail, says Tim Wilkinson.

The remarkable increase in the numbers of transition management service providers continues unabated. This proliferation has served to ensure that the margin pressure, first introduced by the more aggressive of the investment banks around 2001 remains firmly in place.