Weekly Fund Distribution Notes – 18 March 2025

2nd April 2025

Again, lots of fund buyer and mandate news. Scale risking the erosion of alpha. UBS expecting a revival of European asset managers. Also, some key insights from Citywire’s latest special report on private assets, shedding light on some surprising numbers and observations.

Let’s start with the buy-side. The Swedish Fund Selection Agency (FTN), in collaboration with the Swedish Pensions Agency, with EUR 215 billion in AuM, announced the procurement for sustainability solution systems – open until 15 April. The new systems shall help to ensure sustainability of funds within the Swedish premium pension system and must be ready-to-use, off-the-shelf solutions that offer comprehensive analysis capabilities.

Van Lanschot Kempen’s head of investment research / manager research solutions Yaela van Raalte has left the firm after nearly four years. Citywire Selector also featured an interview with BBVA selector Jesús López de la Nieta Cuesta. Another Citywire article featured insights into current views from Nuno Salvador, Lisbon-based portfolio manager and third-party fund selector at Bankinter, and Joao Pisco, fund selector at Alti Tiedemann Global in Lisbon. While Salvador put a lot of emphasis on active ETFs, Pisco spoke about Alti’s alternative manager selection views.

“Time is split between managing existing relationships (60-70%) and hunting for new generators of alpha (30-40%). But not all managers make the cut – especially those chasing scale at performance’s expense. Within alternatives, one key risk we monitor is the erosion of alpha, often linked to aggressive asset growth. From our experience, alpha typically starts to decay when managers become less capacity-constrained and scale too quickly.”

In terms of mandates, LGPS, the EUR 62 billion pool of 11 UK local government pension schemes, has handed US alternatives boutiques HarbourVest Partners and Adams Street Partners a private equity mandate that is expected to exceed EUR 7 billion in assets. In France, Amundi has partnered with Mumbai-based SBI Funds Management for the launch of a contrarian Indian equity fund.

There were also some articles released about the increasing US / Europe divide in terms of asset owners raising questions (which we already covered in the last two newsletters) but also from an asset manager flow perspective. With respect to the latter, Ignites Europe quoted UBS research on listed European asset managers as stating that “a rotation out of US stocks and into European companies would drive flows higher for EU asset managers … the stars are aligning for a renaissance of European asset managers.” As already stated last week, we do not take any political or anti-American stance here. We only observe and analyse.

What else? Citywire Selector released its brand new special report on private assets which provides a well researched read. Interestingly, in spite of significant efforts and acquisitions to increase private markets assets, only four traditional asset managers of the largest 25 fund houses in the world have more than 20% of their assets in alternatives. Eleven have less than 5% of their AuM in private markets, and another five have less than 10%. In terms of acquisition spend, BlackRock takes the undisputed lead with a whopping EUR 27 billion spent just in 2024.

In terms of private asset AuM per type of asset managers, it is bank-backed asset managers who have become the quiet giants of alternatives, running 40% of all private assets by the world’s 25 biggest fund management groups. GSAM and UBS have created two of the largest alternatives divisions among traditional groups, with EUR 481 billion and EUR 444 billion in AuM, respectively.

Talking private markets, private debt continues to be in high demand – so they say – and you know well that we are concerned about too much tourist capital wandering into the sector, with a blow-up almost certain to happen which could ultimately affect the entire sector. In this context, we borrow the headline of a Financial News interview with Paul Burdell, CEO of LCM Partners from last Thursday: “Don’t screw it for everyone else … If you are getting too aggressive on leverage and you don’t take into account the downturn, you can screw it for everyone else.”