1. Newsroom
  2. Upcoming challenges for asset management
Menu
UBP dans la presse 01.05.2019

Upcoming challenges for asset management

Upcoming challenges for asset management

Funds People (29.04.2019) - Nicolas Faller, co-CEO and Head of Institutional Clients at UBP, discusses the industry's challenges for the coming years, such as trends in SRI investment, the absolute return offering and re-evaluating pricing structures.


In recent months, SRI products have been the focus of attention, in both asset management and ETFs. The growth of SRI is unstoppable, but distinctions also have to be made. We are witnessing a real revolution in impact investing.

I am referring to a particular branch of SRI which focuses on measuring and demonstrating the real effect of investments on people and on society. There are companies that will benefit from the change in the global mindset and funds that will know how to pick out the gems that are racing ahead of other companies. At present it is a niche market that is receiving attention from private investors, but soon regulation will bring it into sharper focus for investment advisers. It will become common practice.

In any case this will be in the future because to date assets are not flowing into the waiting arms of asset managers. This is a crucial challenge for the entire industry and all market players have a role to play in the coming years. So far there has been a lot of confusion between SRI, impact investing and ESG criteria, and investors have not yet seen the benefits of this investment strategy.

But I remain optimistic because SRI is not only about feeling good when investing, it’s a way of buying into companies positioned on the crest of the wave, those that demonstrate the biggest growth potential for the coming years. They are looking at double-digit growth simply because there is going to be so much demand.

Liquid alternatives

Unlike in SRI, there is an area with high demand but few attractive opportunities: absolute return strategies. One of the big concerns is how to get attractive returns on cash, given the fact that bond yields will remain low as long as central banks worldwide continue to maintain an accommodative monetary policy.

Absolute return funds have been the industry’s answer to this demand, but they have proved disappointing in difficult market conditions. There are two reasons for this. Firstly, there is the problem of critical size. Above a certain amount of assets under management, extracting value from the underlying strategies becomes difficult. For many asset managers, the only solution has been to adopt a directional strategy. Others have failed to deliver the expected asymmetry and suffered when the markets changed direction.

Our teams stood firm with their investment process and it worked. That is one of the lessons from 2018. UBP really sees strong potential in absolute-return funds provided their size is limited to keep them agile. Specifically, we see space for fixed income growth, as there are some attractive ideas in high-yield and emerging market debt. In equities, we favour a market-neutral position.

Pricing structure

Another hot topic is the surge in index funds, spurred by ample liquidity in the market and by the weak management of many supposedly active investment vehicles. In this respect, we contend that the world is big enough to contain both passive and active management, but the main challenge for the asset management industry will be reassessing the pricing structure both in active and passive management in relation to expected returns.

Indeed, expectations on returns must be dramatically reviewed. According to a recent McKinsey study, 15 years from now an investor might expect an estimated annualised return of 4–5% for equities and 1% for fixed income. In a traditional balanced portfolio this would bring the average return to around 3%. Fees therefore cannot continue to be charged at the same level.

It is a fast-changing landscape where investment managers do not hold all the cards. Part of the job of a distributor must be to educate clients about the return they can expect. To begin with, because the baseline for return on investment is low, compounded by weak growth, zero interest rates and non-existent inflation. An annualised return of 3–4% is not bad. And I think there are some people who keep over-promising.

Our expertise

FALLER Nicolas.jpg
Nicolas Faller
Co-CEO Asset Management
Head of Institutional Clients

Insight

Navigating wealth succession in Asian families

Wealth succession is complex, emotional and can be costly if not managed properly

Read more

Actualités les plus lues

UBP dans la presse 02.04.2019

Zurich, un centre névralgique pour UBP

Le Temps (29.03.2019) - UBP, qui a repris Coutts il y a exactement quatre ans, gère 25 milliards de francs dans la capitale économique, après avoir doublé ses avoirs en cinq ans. Rencontre avec Adrian Künzi, responsable de la filiale locale depuis un an.

UBP dans la presse 26.03.2019

UBP envisage tous les scénarios de Brexit avec sérénité

AWP (25.03.2019) - Union Bancaire Privée (UBP) a anticipé les incertitudes pesant sur l'avenir de la Grande-Bretagne face à l'Union européenne. Le renforcement à Londres, avec l'acquisition récente d'ACPI, et la présence à Luxembourg permettent à l'établissement genevois de parer à toute éventualité, a expliqué à AWP le directeur général Guy de Picciotto.

UBP dans la presse 03.04.2019

Réexposition progressive au risque crédit

Option Finance (21.03.2019) - Au regard de la « normalisation » de la croissance économique, de la fin du resserrement monétaire des banques centrales et de la recrudescence de la volatilité, il est utile pour les gestions obligataires d’aborder la classe d’actifs selon trois axes majeurs : une réexposition progressive au risque crédit, l’augmentation de la duration et la recherche de liquidité.

A lire également

UBP dans la presse 18.09.2019

Challenges & Opportunities in Impact Investing

Financial Times (12.09.2019) - It is difficult to regard the 2008 financial crisis in anything other than a negative light. However, for one area of investment, it marked a significant acceleration in prospects.

UBP dans la presse 13.09.2019

Asset TV Masterclass : Fixed Income

With interest rates at rock bottom, bond markets have become very expensive. So why would anybody want to invest in fixed income? Where does the balance between risk and reward lie in these markets and how are central banks responding to slower growth?

UBP dans la presse 11.09.2019

L'évolution du métier de banquier privé à Monaco

Monaco for Finance (12.09.2019) - Depuis quelques mois, Sérène El Masri est Site Manager de la succursale monégasque de l’Union Bancaire Privée (UBP), une banque qu’elle a intégrée en 2017, à Genève, à la tête des activités Private Banking pour Monaco, le Luxembourg et le marché de la Francophonie. Femme de challenges, elle nous livre ici ses premières impressions sur le marché monégasque.