The Italian investment market is set for a shake up as the Ucits III directive comes into force and open architecture begins to really take hold. The first of the European Fund Series of conferences, to be staged by PWM and BNP Paribas in Milan, will examine the implications of these developments, focusing on issues of investment product design and distribution.

Banks and wealth managers should not be held responsible for their client’s bad investments, according to Willem van Someren Gréve, executive senior vice-president of Robeco Asset Management.

Alan Brown, who recently vacated one of the highest jobs at the world’s largest institutional asset manager, State Street Global Advisers (SSgA), has resurfaced at Schroders, where he will replace Richard Horlick as head of investment. Mr Horlick, formerly with Fidelity, is associated with traditional UK institutional management.

After several patchy years for wealth management deal flow, is now the time to bring private client businesses to market? Rumours of the accelerated potential for M&A activity in the wealth and asset management sector have not been exaggerated and the sweet spot for deal opportunities is in the region of £5bn (E7.3bn) to £15bn of assets under management.

The business models of these firms inhabit a twilight world—too small to be big and too big to be small. One recent example in the UK—a microcosm for transactions occurring on the Continent—is the £188m reverse offer by one private client investment manager, Rensburg, for another, Carr Sheppards Crosthwaite (CSC). CSC has £10.3 bn under management. Another has been the recent MBO of Tilney Investment Management, with £5bn under management. Meanwhile, there is the pending auction for the UK-based asset management business of Deutsche Bank. An undeclared slug of this business is private client funds.

Direct beneficiaries of this activity are the – currently – limited number of boutique corporate finance advisors working on the deals. One of the most ubiquitous so far this year has been independent corporate finance adviser Hawkpoint, which had a brief involvement in the CSC deal while acting for Rathbone Brothers on a counter-bid, and which is rumoured to acting for Deutsche Bank. This latter deal is expected to be worth some £400m to £800m. Another active advisor is Livingstone Guarantee, which acted for Refco in the MBO of Tilney Investment Management. A third is Ray Soudah’s Swiss-based Millenium Associates which has now acted for Barclays Bank in the French acquisition of ING Securities Bank.

There is little doubt that corporate buyers and financial investors, as well as their M&A advisors, will steadily turn their attention to the busy wealth management sector. These deal hunters are sensing that the choppy nature of the market is now throwing up more opportunities than ever and a rebalancing of the global wealth management landscape is underway. Furthermore, the fragmented nature of the wealth management market provides ample opportunities for existing players to grow and for financial buyers to create value. In this context, the advisors sense a killing opportunity, or more pertinently, an opportunity to make a killing.

Standard Asset Management has launched a hedge fund investing in both high yield and emerging market debt. The Strategic Bond Fund seeks to deliver absolute returns of 10 to 15 per cent. Volatility is to be kept at relatively low levels of around 6 to 8 per cent.

Rupert Hengster, CEO of Oppenheim Asset Management, talks to

Yuri Bender about how a privately-owned bank can take on German giants

Volumes going into structured products in Germany are now so big that they can negatively affect the managed funds business, believes Rupert Hengster. He admits that structured products are not so transparent in terms of pricing and says banks must guard against the temptation of easy, but inappropriate sales. “We must really avoid structuring products first and then looking for markets.”

As former head of strategy at Axa Investment Managers, Kirk Hotte is well placed to market a re-engineered range of products to Europe’s

distributors in his new role. He reveals his blueprint to Yuri Bender

The systematic approach favoured by Kirk Hotte means that a plan of action is identified for each country. Axa IM has sourced ?164bn of its asset from outside France. In 2004, the strategy team at Axa IM, which was headed by Mr Hotte at the time, before his transfer to the distribution department, decided that in Germany the sales team would concentrate on selling the Immoselect property fund, in addition to products managed by the quantitative led Axa Rosenberg subsidiary.

The reluctance of distributors to invest in technology is amplified by the adoption of complex vehicles such as funds of funds, writes Roxane McMeeken

Q&A; with Hugh Griffiths, assistant director to specialist investment management consulting firm, Citisoft.

The structured products industry responds to pressure to create new, performance based solutions

Liability matching strategies, once the preserve of pension schemes, are increasingly being employed by life insurance companies and other distributors

The industry has some work to do to clear up any confusion about how structured products operate, so leading to greater customer acceptance

Manufacturers, distributors, managers – how are their relationships changing with one another, and who will gain the ultimate prize of interacting directly with the final client? With these issues set to be thrashed out at Fund Forum 2005, Roxane McMeeken examines the likelihood of mergers and more outsourcing.

Simon Hildrey reviews the recent performance of US stocks and discovers that fund managers are polarised about what will happen next

“Our balanced portfolio retained roughly the same equity weighting as last month. Our main change was selling the last US equity fund that remained and adding an extra European equity manager, which is focused on a growth at reasonable price, thematic approach. On the other hand, we have reduced the risk budget of our fixed income portfolio by selling half of the high yield funds. Within the next few months, we do not intend to increase the equity weighting, as we expect rather volatile markets.”

“April saw the increase in market volatility continue, and most markets lost money in euro terms. Exceptions were Japan and bond markets, with our Japanese portfolios overweight, offsetting a bond underweight. Excellent performance from Atlantis Japan which was up 5.8 per cent assisted the returns further. Elsewhere, performance averaged out and we still believe it is important to look through this volatile period. So we propose no changes.”

“US quarterly statements imply less buoyant conditions but corporate America remains in good shape. Higher interest rates and oil prices are lengthening the current cycle, not curtailing it. If these concerns are transitory, equities should regain ground recently lost and make further progress. While the evidence unfolds, however, the mood of defensiveness is likely to prevail and may provide a buying opportunity in riskier assets such as small caps and emerging markets.”

“We have slightly reduced our exposure to equity markets by cutting the Fidelity European Growth and the Nordea North American Value funds. In the bond sector we reduced our exposure to credit by taking profits from the Aberdeen Sovereign High Yield Bond Fund and the Invesco Extra Income Bond Fund. We then invested in the Spaengler Cash Trust, the Henderson European Equity Market Neutral Fund and the Dexia Credit Arbitrage in order to diversify risk.”

“The overall fixed income exposure of the portfolio has been significantly reduced in favour of L Multi Hedge, a multi-strategy fund of hedge funds which aims to deliver 2 to 4 percentage points above the money market rate, with a long term volatility of 2.5 per cent. Our goal is twofold: first the search for an alternative to fixed income which appears to be less attractive due to the current level of interest rates ; second to improve our risk reward by introducing an asset class with a very low correlation with bonds and equities.”

“We moved out of Ashmore Emerging Markets Liquid Investment Portfolio based on an asset allocation shift out of emerging market debt and into higher quality government bonds. Despite the improving health of emerging economies, we are concerned about the risk that rising US rates will lead to an unwinding of the emerging markets carry trade. The spreads offered by emerging market bonds can no longer justify the additional risk. In equities, we are further reducing our exposure to US managers and increasing Europe, Asia and emerging markets.”

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.

Despite the real estate market glut in Germany, a handful of innovative managers are starting to buy up assets, writes Roxane McMeeken