Where once taking the route of sub-advisory was regarded as an admission of failure, for private banks and fund management houses, today it is seen as a sign of strength. Forward thinking, consumer focused organisations have realised that to meet the demands of a smarter, more demanding client, partnering with non-competitive organisations is a real opportunity. The focus in today’s market is on the individual that requires a new way of thinking and the market recognises three main pillars at the base of any winning sub-advisory proposition.
Providing value: differentiation, innovation and focus on providing value to client are all that matters. The opportunities introduced by the advent of open-architecture have materialised due to consumer demand.
Product delivery: products can no longer be disaggregated. An holistic approach to product delivery covering, advice, performance, brand, innovation and investment is required.
Strategic partnerships: few, if any, organisations can deliver all that is needed to create such products. Multiple organisations working together in strategic partnerships will be the way forward.
In a recent project all these pillars have been considered by both the sub-advisor and the funds distributor.
Banca Fideuram, a leading Italian and European private bank with €63.5 bn of assets under management, 701,000 customers and 4189 private bankers*, decided to outsource a mandate for a specific fund in order to enlarge its products range and better serve their HNWI clients.
The new fund is part of Assogestioni flexible funds category, a specific Italian category of funds that do not have benchmark and leave freedom to the fund manager to move the allocation from 0 per cent to 100 per cent in equities. The rationale behind the decision to outsource has been driven by the need for a specific investment solution.
Banca Fideuram wanted to offer to their client an innovative product, managed by a best in class house, that could add value to their already first class offer.
The final product, built by GSAM matching the needs of Banca Fideuram, searches for investment opportunities through both a strategic allocation, the basis for medium- and long-term investment choices, and a tactical allocation, achieved by means of short-term movements between the various investment classes and between individual countries.
This is an efficient quantitative process for the analysis and selection of global equity and bond markets. It aims at a low correlation with traditional investments by seeking opportunities for returns not only within a given class of assets but also among different asset classes.
The basis of the strategy is the search for incremental value through the following decisions:
- Allocation among equities, fixed income and cash;
- Allocation of different countries among fixed income and equities allocation;
- Allocation to specific investment themes that can be done within the above asset classes.
Max Nardulli is managing director, head of Goldman Sachs Asset Management, Southern Europe.
Researched and published in association with Goldman Sachs Asset Management.
*as at September 30th, 2005
