Filed Under:Life Insurance, Life Planning Strategies

Investment philosophy is top European fund selection criteria

Investment philosophy, transparency and due diligence are the three most important criteria that major European fund buyers consider when deciding on a portfolio manager.

So finds Cerulli Associates in a new report, “European Fund Selectors 2013: Standing Out in a Crowded Market.” The research draws on a survey of 153 European fund selectors, a poll of 14 asset managers representing assets totaling $5.6 trillion, and an asset manager roundtable hosted by Cerulli in London in March 2013 and more than 70 interviews with fund buyers.

When asked to rate their top criteria for fund selection from 1 to 10 (where 1 = not important and 10 = very important), survey respondents rank “investment philosophy” a 9.0 — the highest score received among 10 selection criteria. Transparency of investment process and due diligence process/risk controls rate 8.7 and 8.4, respectively.

Here are scores for all 10 selection criteria:

Selection  Criteria

Score

Investment philosophy

9.0

Transparency of investment process

8.7

Due diligence process/risk controls

8.4

Access to portfolio managers

8.2

Fund performance

7.9

Timely and accurate fund data

7.2

Fund size

6.6

Stability of parent group (if applicable)

6.5

Fees

6.4

Branding and marketing support

5.6

“Generally, smaller fund buyers with limited resources are more forgiving if performance is strong,” the report states. “But to get on the central buy lists of major buyers, consistency and an ability of the portfolio manager to demonstrate an understanding of investment philosophy is critical.”

When questioned about which distribution channel exerts the greatest pressure on fees, respondents rate both insurance arms and asset managers the highest at 3.6 (where 1 = no pressure and 5 = very significant pressure). Asset managers rate other distribution channels the following:

  • Retail banks: 3.3
  • Fund supermarkets/online platforms: 3.3
  • Private banks: 3.2
  • Consultancy firms: 3.2
  • Wealth management boutiques: 2.9
  • Independent financial advisors: 2.6
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