Weekly Fund Distribution Notes – 01 April 2025
27th May 2025
Times of rapid change. After years of low interest in HFs, L/S and market neutral strategies, they are making a comeback in terms of fund buyer interest and selection. So does long shunned defence investing, even in ESG portfolios. Also, there’s no such thing as one definition for fund selectors. Last but not least, some interesting facts about asset raising in Spain.
Wow, Q1 has already flown by and what a quarter it was. Full of geopolitical and in consequence economic chills, thrills and twists, beyond previous imagination, as well as a significant change in European versus US market momentum. The first quarter also saw a number of very large mandate news and some remarkable fund flows (see previous newsletters).
Looking at last week’s buy-side news, HSBC AM has launched a fund of hedge funds, a European version of its Global Hedge strategy launched back in 1996. The timing isn’t unintentional for sure. After years of low interest in HFs, L/S and market neutral strategies, these are really coming back on fund buyer tables. Citywire Selector features a number of Alts and ELTIF related fund selector articles (see also our newsletter from 5 and 18 March), an interview with DWS´ co-head of allocation / multi-asset Peter Warken, a Swiss selector panel featuring Oksana Kononenko, product portfolio specialist at Bergos, Christoph Boner, chief investment allocation officer at Vontobel and Cédric Priouzeau, head of fund selection at Banque Heritage.
However, it was another article with some nuances on the role, challenges and the future of the fund selector which caught our attention: Citywire talking to Lisbon-based selectors Nuno Salvador (Bankinter), André Pint (Alti Global), BPG’s Paulo Pacheco and BancoCTT’s Francisco Veiga. Every fund selector has a specific setting and to a large degree also their own definition of their roles. There is no such thing as one pure role definition or setting, a fact that many salespeople struggle with when aiming for attention, face-time and ultimately assets. It takes more and more prep work and well-targeted / segmented, if not bespoke initiatives in reach-outs. Give us a shout if you would like to discuss this in more detail.
Defence was long shunned in ESG and in particular in ethical investments. However, times are changing at a rapid pace. So are buy-side perspectives, selectors and asset owners alike. So far, there is not overall change, but certainly a lot of debate. However, some very large buy-side and pensions accounts, particularly in Scandinavia, have opened up to defence investments within ESG frameworks and we expect broader defence implementation across European ESG-minded buy-side accounts.
Talking ESG, sustainable or responsible investments, the UN-backed Principles for Responsible Investment rightly stated that the alleged shift away from responsible investment is overstated. The body published its 2024 signatory reporting last week, showing that investors were “continuing to engage on responsible investment issues such as climate related risks, governance, and human rights and social issues”. The PRI said its findings, covering 3,048 investment managers and asset owner signatories, came “against a changing political and regulatory backdrop in some markets”.
Although stating “what we are seeing is that signatories are going back to basics, assessing their work and evolving it in line with the world around them … encouragingly, on many metrics there is little change on actions on physical climate risks or human rights and social-related issues from the previous year’s data.” Looking at external manager selection PRI’s analysis showed that the proportion of asset owners that evaluate investment managers’ policies or guidelines on proxy voting as part of their manager selection process actually increased from 74% in 2023 to 81% last year.
In this context, it might be worth recalling that in spite of plenty of headlines and industry talk suggesting otherwise, many ESG fund closures and rebranding, global and European ESG assets continued to grow throughout 2024 – actually to an all-time AuM record level.
For many European pro fund buyers, ESG assessments are an established core part of their due diligence / analysis. However, they are not led by SFDR classifications anymore, but much more by the credibility and coherence of ESG integration in holding analysis and portfolio construction. Obviously, depth levels vary from region to region as well as from account to account, but ESG, regardless of some governments’ efforts aiming for the opposite, is here to stay. Also, in particular on the consultant side, ESG integration, human rights issues and respective credibility are still a must and we do not foresee any material change here – at least on this side of the Atlantic.
What else? “Want to raise EUR 100 million for unloved value? Go to Spain!” was the headline of another Citywire article from last week. Without entering further into the article, the headline has a point. Despite Spain’s limited overall size in AuM, it is one of the most open markets for international best-of-breed managers. Even some large or midsized managers have more assets in Spain than in Germany, for instance, while the overall German asset pool stands at around 8 times the size of Spain. How come? Well, for instance the Spanish FoF market is more or less the same size as the German one, but more than 90% of Spanish FoF assets are invested in third-party funds. Yet FoFs are not the biggest channel in Spain. Let’s talk.
