Joachim Faber promotes ‘in-house outsourcing’ strategy, outlining limited scenarios where open architecture is preferable. Paula Garrido reports

Has the much-hyped outsourcing of assets by life companies to specialist sub-advisers actually gone too far? No, says, James Bevan, chief investment officer of Abbey, responsible for the bank’s Scottish Mutual and Scottish Provident life offices.

Promotion of BVI chairman Axel Benkner to global head of retail for Deutsche Asset Management raises Frankfurt’s status. Yuri Bender reports

Schroders has secured further distribution success through the selection of four of its funds – investing in the UK, European, and Japanese equities, plus fixed income – by the multi-manager range promoted by Skandia Investment Management.

The explosive growth of the wealth management industry in Asia Pacific appears to be helping to turbo charge the profitability of the world’s top global private banks. This brings good news for shareholders and private clients alike. In our early analysis of the largest private banks that have so far provided earnings figures for 2004, the indications are that the main players have enjoyed a bumper year. However, the full picture has yet to develop as most major houses have still not reported.

Burkhard Varnholt, of Credit Suisse’s private banking arm, will do

everything to guarantee customer satisfaction. Yuri Bender reports

Merrill Lynch Investment Managers is doing better business in Europe since cutting back the number of distributors. James Charrington, the firm’s head of non-US retail, explains why to Yuri Bender

At Merrill Lynch Investment Managers (MLIM) and its competitors, restructuring the sales force has been vital to address changing markets in Europe. At the same time as James Charrington was given responsibility for the European retail business in early 2004, all institutional business outside the UK was also outsourced to him. He then identified certain markets, such as Germany and the Netherlands, where he felt there was a greater opportunity to win assets from institutions and other key distributors.

Woeful inflows into European money market funds in 2004 obscure the fact that interest in guaranteed and cross-border funds grew appreciably. Paula Garrido explains why the pace of growth can be considered less important than the evolutionary development of the European fund management industry as a whole

Single registration could save time and money for fund managers wanting to distribute funds across borders. In the same way, achieving common European standards in fund processing will bring further efficiency to the industry.

As markets mature and country profitability levels converge, distributors are likely to outsource asset management in order to maintain competitiveness

Creating a successful sub-advisory partnership is no easy task, requiring careful strategy selection, an alignment of interests between both parties and the involvement of information technology staff in the construction of a suitable infrastructure

The rationale behind outsourcing asset management is the same as for outsourcing other non-core activities: allowing professionals with specialised skill sets and greater resources to manage or advise on an area outside a firm’s core expertise

Luxembourg’s dominant position in the costly business of transfer agency seems assured, especially given its collective efforts to standardise and automate the industry. But Dublin is snapping at its heels. Paula Garrido reports

Current account surpluses and more flexible currency regimes means emerging markets are more likely to hold onto recent gains. Simon Hildrey explains

“With the important exception of the US, major markets recorded new highs during the first couple of months of the year. In particular, natural resources, both mining and energy, had the most impressive returns.

“With these good returns we decided to take some profits off the table and to reduce our exposure to equity markets as a whole, beginning with the US markets, which are more expensive and failed to gather any momentum so far this year.”

“Risk was again rewarded in February with bonds underperforming equities, and higher beta markets excelling. The exception was technology, which meant Legg Mason continued its hangover after last year’s Q4 sprint to the line. In February our overweight in equities was increased, and within this favouring Japan and Asia paid off. But Europe was our best area both for absolute returns and for the peer group ranking of our fund selections.”

“Bonds and equities moved in opposite directions over the last month – the former showing renewed concern about interest rates and the oil price, while good earnings news boosted the latter. Cash flows have improved sharply, reaching investors by way of dividends, share buybacks and, increasingly, corporate activity. Most equity markets look reasonably rated with upside potential if earnings continue to rise in 2005. Japan, Far East and emerging markets remain our preferred areas.”

“Higher growth rates in emerging markets in contrast to the developed countries and the, in our view more, favourable valuations in Europe means we remain overweight in these regions.

“However, economic data show that the US economy is still growing strongly. The weakness of the dollar against the euro should help US exporters. We do not see a major change in US trade policy so we expect the dollar to remain weak.”

“As opposed to the previous review where made changes were made to the portfolio, this month everything stays the same. Our allocation to equities – which is overweight in Europe and Asia and underweight in the US – has brought positive results. We have a more cautious bias towards smaller companies as their risk reward appears less attractive than for larger companies. Fund selection, which is only based on very actively managed funds, has behaved well in general and has also contributed positively to performance.”

“We are gradually decreasing the US equity exposure. We also added a small position in Genus 15. Genus 15 focuses on a selected universe of under-followed European (ex-UK) firms whose earnings potential is not recognised by the market. The long segment of the portfolio will be concentrated into a maximum of 15 equities representing the managers highest conviction ideas. On the short side, the manager tends to focus on those firms where cash flow generation is weak but not yet fully reflected in reported earnings. ”

Each month in PWM, six top European asset allocators reveal how they would spend E100,000 in a fund supermarket for a fairly conservative client with a balanced strategy.

Overweighting Asia-Pacific and emerging markets as well as underweighting the US produced the best returns in the three months to January – and small and mid caps outperformed large caps. Paula Garrido reports on the main drivers of global equity fund performance

With high net worth individuals in mind the French regulator has introduced rules to provide for structures that are allowed to invest in hedge funds. Henry Smith reports