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July 9, 2018

The Due-Diligence Imperative: Lipper Fund Selectors Forum 2018

by Jake Moeller.

The fourth annual Lipper Fund Selectors Forum was held at the Thomson Reuters Auditorium, Canary Wharf, on July 4, 2018.

Mutual fund research and selection, along with portfolio construction, are crucial components of the investment distribution value chain. Increased due-diligence and governance requirements imposed by regulators mean the fund selector and portfolio constructor have more influence on–and responsibilities to–investors than ever before.

Lipper was pleased to host again this flagship industry event showcasing the challenges faced by the fund selection and portfolio construction industry in 2018 and the benefits it brings to the financial services industry.

Once again, we were proud to partner with the Chartered Institute of Securities and Investment (CISI). We welcomed some 150 guests, consisting of private wealth advisors, financial planners, fund managers, gatekeepers, platform providers, investors, and journalists.

Presentation 1: fund flow-patterns in Europe

Lipper’s Detlef Glow

Lipper’s Head of EMEA Research, Detlef Glow, outlined current investor appetite by examining trends in pan-European fund flows. He revealed that the mutual fund market in general is in robust health, with a milestone of over €10 trillion in assets under management reached, following a record year of sales in 2017.

Key points included:

  • YTD May 31, 2018, the best selling sectors were Unclassified, Equity Global, and Equity Emerging Markets Global, with approximately €42 billion of combined estimated net inflows.
  • Over the same period net outflows from Money Market GBP, Bond Euro Corporates, and Bond USD High Yield totalled approximately €22 billion.
  • Aviva Investors, BlackRock, and UBS, with approximately €50 billion of net inflows, were the top fund houses for 2018 YTD.
  • ETFs and tracker funds totalled 12% of total AUM in the pan-European funds market, with the rest held by active funds.

Panel 1: Fund selection and the due-diligence imperative

(L-R) Jake Moeller, Victoria Hasler, Tony Yousefian, Lucy Walker

Jake Moeller presided over the first panel session with panellists Victoria Hasler from Square Mile Research, Tony Yousefian from FundCalibre, and Lucy Walker from Sarasin, who discussed fund selection criteria, client alignment, sell-decision rules, the importance of environmental-social-governance (ESG) criteria, and the changing nature of the fund manager relationship.

Key points:

  • Consistency of performance and style remains a major criterion for fund selectors.
  • Deviating from defined processes (even if it results in outperformance) is a red flag for a potential sale.
  • Underperformance doesn’t always reflect a lack of skill.
  • Fund capacity is a potential problem, but it needs to be considered on a fund-by-fund basis.
  • ESG considerations are no longer incidental to fund selectors and generally form a key part of the gate-keeping process.
  • Good fund selectors need to be aware of boutique offerings and be prepared to bring new ideas to market.

Panel 2: portfolio construction and the macro environment

(L-R) Jake Moeller, David Coombs, Peter Fitzgerald, Justin Onuekwusi

Jake Moeller moderated the second panel with Peter Fizgerald, CIO, Macro and Multi-Asset at Aviva Investors; David Coombs, Investment Manager at Rathbones; and Justin Onuekwusi, Multi-Asset Fund Manager at LGIM.

The panel discussed the evolution of portfolio construction from long-only funds of funds to today’s popular multi-asset and targeted-volatility funds. The panel also outlined portfolio positioning and discussed current headwinds and opportunities in the market.

Key points included:

  • Cost pressures and low barriers to entry have made a traditional active fund-of funds structure a difficult proposition to market.
  • Some fund-of-funds structures still have a place, but structures need to be carefully considered.
  • Investors are now much more risk conscious, and absolute returns are preferred to relative returns.
  • Demand for income and higher preretirement management are creating a bigger gulf between retail and institutional investors.
  • Panellists were sanguine on selected equities’ holding cash to reduce volatility, but investors need to be creative by using tools such as derivatives to enhance flexibility.
  • Beware the use of “late cycle.” There is still potential for markets to run for several more years in a “lower for longer” interest-rate environment.

Panel 3: Diversity in the funds industry

(L-R) Jake Moeller, Bev Shah, Maike Currie, Natalie Kenway

Jake Moeller moderated the final panel of the morning, which examined the issue of workplace diversity in the funds industry. He was joined by Bev Shah, founder and CEO of CityHive; Maike Currie, Investment Director at Fidelity; and Natalie Kenway, Deputy Editor at Investment Week. The panel outlined the importance and benefits of improving gender, sexuality, ethnicity, disability, and age diversity.

Key points included:

  • “Group think” is a huge risk to companies; improved diversity reduces this.
  • Cognitive diversity should be a broad objective of all working environments.
  • Female role models in the financial industry are too few.
  • Quotas and legislation are not always ideal but are important early in the formation of the diversity narrative.
  • Diversity formulated as a box-ticking exercise can be counter-productive.
  • Fund groups are now much more aware of diversity issues, and the narrative is becoming more popular with the readers of mainstream and trade press.
  • Flexibility in the workplace is a strong foundation for improving broad diversity.
  • Managers should consider their workplaces as a “community” and encourage networking among its different constituents.
  • The fund selector has a key role to play in lobbying fund houses to improving diversity through the request-for-proposal (RFP) process.

Audience engaged

Audience participation at the third annual Fund Selectors Forum was exceptionally high, with excellent questions and some particularly passionate points of view being raised throughout the event. At the start of the Forum audience members were encouraged to engage this event via social media, and #LFSF18 garnered considerable commentary.

The issues raised in this year’s Fund Selectors Forum are at the forefront of the industry and will continue to evolve in 2018. Lipper and the CISI have demonstrated the importance of facilitating such crucial debates.

We look forward to welcoming you again in 2019.


Lipper delivers data on more than 265,000 collective investments in 61 countries. Find out more.

This material is provided for as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.



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