fund selector - citywire.co.ukthe citywire spanish funds roadshow march 2008 citywire fund selector...

March 2008 Issue 49

FUND SELECTOR

Spanish Funds Roadshow 2008

The Citywire Spanish Funds Roadshow March 2008 Citywire Fund Selector

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In Spain, as in the rest of Europe, 2007 was a year which saw fund managers facing widespread market turbulence. As a result, say the country’s fund selectors, investors are shying away from more complex fi nancial products. So what are the implications for the growth of the third party funds business in Spain? Our panel of leading selectors and international product providers offer some interesting answers.

Spanish selectors focus on simplicity

Angus FooteEuropean editor


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The Attendees

Rafael HurtadoHead of multi-management, Grupo Banco Popular

Rafael joined Banco Popular (then Sogeval), in 1998 as a member of the asset valuation team. He became head of the multi-management team in 2000, responsible for investments in third-party products, in-cluding long-only funds and alternative investments.

Víctor Alvargonzález Chief executive offi cer, Profi m

Victor is a founding partner of Profi m. Founded in 1996, the company specialises in fund selection and open architecture portfolio management. Previously, he was head of asset man-agement at FG Inversiones Bursátiles.

Jaime Pérez-MauraHead of equity strategies fund research, Allfunds Bank

Jaime is responsible for European equity research at Allfunds Bank and heads their equity strategies team. He has worked in the mutual fund industry since joining the fund distribu-tion unit at Banif in 1999.When Allfunds Bank was created in 2000, Jaime joined the investment con-sulting unit as an analyst.

Carlos FernándezHead of quantitative and qualitative teams, Inversis Banco

Carlos is responsible for fund research and has worked in the mutual fund industry since 2003. He was previously involved in research support for private bankers, delivering investment solutions for high net worth individuals since 2001.

Joaquín CasasúsManaging partner, Abante Asesores

Abante Asesores is dedi-cated to advising private and institutional clients in wealth management. Joaquín heads the asset management department, specialising in managing funds of funds. He started his career in 1993 at AB Asesores and when Morgan Stanley bought the fi rm Joaquín was appointed executive director.

José HinojoFund analyst, Renta 4

José works in the active managment department of Renta 4. He has worked in the mutual fund indus-try since 2000, when he worked in Altae Banco, Caja Madrid Private Bank as analyst in the Investments Deparment. He began work-ing in Renta 4 in 2006 and is in charge of structured products in the deparment.

Eduardo SánchezPortfolio manager, funds of funds, Inverseguros Gestión SGIIC

Eduardo joined Inverseguros Gestión SGIIC in 2007. He has been researching, ana-lysing and selecting funds since 2001, when he joined ICR to work in the selection of traditional Equity Funds and Alternative Investments. He is a CFA charterholder.

Iñigo Bilbao-GoyoagaCountry manager,AXA Investment Managers

Iñigo opened the AXA IM offi ce in Madrid in 2002 and before joining AXA IM he held sales positions at JP Morgan, Credit Suisse and Dresdner Asset Management. He has 17 years of sales experience in com-mission businesses including securities services, brokerage services, private banking and asset management.



Pablo AnabitarteExecutive director and head of sales, Fidelity International

Pablo has been an ex-ecutive director at Fidelity Investments International since 2000. Prior to this, he was head of equities at BBVA Gestionova and Argentaria. He has over 15 years’ experience.

Félix LópezChief executive offi cer, Atlas Capital

Félix worked for AB Asesores and Morgan Stanley for 10 years. He was the co-founder of Atlas Capital Inversiones AV in 2003 and Atlas Capital Gestión SGIIC in 2005. He is now responsible for investment decisions.

Javier KesslerManaging partner at KAFondos

Javier has worked in various institutions of the Euro-pean mutual fund industry. Initially at the stock market department of the Na-tional Commission for the Securities Market and in the registration and verifi cation of collective investment institutions. He also worked at Renta 4 SV SA, and Capital at Work international.

Noemi SaidDirector of development for Quality funds,BBVA

Noemi heads the third party funds specialised area of BBVA. Starting at the fi rm in 1999 she has always been connected with Asset Man-agement Business, joining Quality Funds in 2004 as US and Global Equity Analyst until 2006 when she took on new responsibilities. She is a Chartered Financial Advisor.

Frits CarlsenRegional director, Sparinvest

Luxembourg based Frits Carlsen is responsible for business development and client relationship manage-ment for the Spanish, Italian and UK markets. His long experience within the Finan-cial Services and Asset Man-agement industry includes client/investor relationship management roles with Eagle Star and with Nordea Investment Funds.

Sasha EversBNY Mellon Asset Management

Sasha Evers joined BNY Mellon Asset Management (formerly Mellon Global Investments) in 1999 and es-tablished the Madrid branch in 2001. He currently heads the fi rm’s activity in Spain and Portugal representing the company’s specialist as-set management companies to institutional/wholesale clients and retail distributors in the region.

Angus FooteEuropean editor,Citywire

Angus is responsible for all Citywire’s editorial cover-age of the funds industry in mainland Europe. He previ-ously worked as an editor on investment websites for the Euromoney Institutional Investor group in London and New York. He has also published articles in the Financial Times.

Jesús SobralHead of research, Spain and Scandinavia, Citywire

Jesús joined Citywire in 2005 and is responsible for Citywire’s analysis of fund managers in the Spanish industry. He has a degree in journalism from CEU San Pablo University of Valencia.



ANGUS FOOTE, Citywire: How has the demand for third party funds in Spain de-veloped over the past year and how do you expect it to evolve over the coming year?

FÉLIX LÓPEZ, Atlas Capital: The demand for third party funds in Spain and Europe has been a complete contrast. We have had a pretty good 2007 for the fi rst six months, but at the end of the year it was different. In the third party fund depart-ment we have been looking for new things, but in the last six months, there have been diffi cul-ties in both the credit markets and the money market.

In the end there have been too many questions and not so many answers, so I

think it has been a tough year, especially in the last six months and I think it’s some-thing that is still happening right now.

We have a lot of demand in the more conservative funds, but people are quite concerned about the assets underlying these funds. On the other hand we have seen a strong demand for new asset funds like commodities and uncorrelated assets.

RAFAEL HURTADO, Grupo Banco Popular: In the crisis in July and August many people were not only very conservative but were looking for funds that are not complex.

If you explain a complex fund – for example: does this fund have long or short buyers, does it have a fi xed income strategy that is very complex? it is diffi cult to sell.

It’s the basic things that need to be clear: equity and fi xed income.

There has been a lot of fi xed income products that are supposed to have very low volatility and low risk, but in the end the performance has been pretty disappoint-ing. So now people want to understand everything.

VÍCTOR ALVARGONZÁLEZ, Profi m: There is a view that volatility is not necessarily bad for third party funds in general, but you have to make a distinction between investors and savers, who just want their reward plus a little bit. On that side, it is obviously a very bad situation and in fact, with competition between banks to get money to get liquid-ity, it makes things worse. But investors are

‘In the end there have been too many questions and not so many answers, so I think it has been a tough year, especially in the last six months and I think it’s something that is still happening right now’

Félix López,Atlas Capital

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different. They are looking for a reward that deposits cannot give, so what they do is look for funds that may perform well in this new scenario and these alternatives may well be in third party funds.

If I am with a bank and the bank offers me 50 funds to choose from, I stay there when everything is going well. But when things go wrong, investors start to think, ‘Is there another model? Maybe I can have different things if I go to an open architecture system’ and then they start to think about changing, about moving and I think that’s good. In our experience, bad years are quite good in the sense of getting new clients, because people tend to move to fi nd new things.

JAIME PÉREZ-MAURA Allfunds Bank: Demand has really been decreasing over the second half of the year, mainly due to the dilution of money market dynamic funds. That’s one of the principal reasons for observing a large decrease in demand for third party funds, seeing as the money market dynamic funds generally represent a large part of the cake.

The other important issue is the chang-ing attitude of the large banks in Spain. We see large institutions reconsidering their approach to third party funds after watching their market shares decrease dramatically over the last year and a half. You can ob-serve how some of them are now somehow stepping back and trying to reassess their third party fund exposure. Their need for internal fi nancing through deposits is also infl uencing the decrease in demand for funds in general.

JOAQUÍN CASASÚS, Abante Asesores: I defi -nitely agree that the net effect is pretty bad, because at least in Spain, around 80 per cent of investors are just savers.

In Spain the big commercial universal banks are the main distributors of funds and asset managers. So in the end the market picture relies on what strategy they are follow-ing. For them it was important to earn commis-sions through funds, so they developed a huge asset class that was enhanced money market funds, but this was a substitute for deposits.

They ended up believing that a fund could provide Euribor plus one without any risk and that this would carry on forever. Then the reality showed in August and the strategy changed. That asset class is probably dead and now we are going to see money going into deposits, because the strategy is to fi ll the balance sheet with money at this time.

‘People have tried to convince clients that diversifying pays, but this has proved wrong up to now – the Ibex beat almost every index in the last fi ve years’

Joaquín Casasús,Abante Asesores



Another thing that makes Spain different is the Ibex. People have tried to convince clients that diversifying pays, but this has proved wrong up to now – the Ibex beat almost every index in the last fi ve years. So in my case, be-cause we are particularly global and try to teach clients how to invest, it’s kind of frustrating.

NOEMI SAID, BBVA: We don’t have the complete data for 2007 regarding crossover and sales of third party funds in Europe, but by October it was well up for the year, then in November and December we had two very bad months.

In Spain in 2007 there was a decrease across the whole system. The main losers – I agree with Jaime – have been the short-term dynamic, or money market funds.

Another category, global funds, has de-creased a lot and these two categories stand for almost 90 per cent of third party funds in Spain. So clearly third party fund demands have been hit.

Is that negative or not? Well, we think because banks have obviously promoted deposits, many people have gone to that kind of asset class. It is easier for them, it is comfortable and they can avoid market turbulence. But that doesn’t mean that’s bad, because there’s a lot of money there right now, so maybe if we see more market corrections and then a clear upward trend, people might start investing.

IÑIGO BILBAO-GOYOAGA, AXA Investment Managers: It is clear that money market funds have been questioned during 2007. Both sides, the private banker and the factory, didn’t explain clearly that these products were for bull markets. I don’t think we gave this message. People thought that they were real money markets and we didn’t explain what the reality is, this being that with bear markets, the result of the perform-ance was going to be different.

SASHA EVERS, BNY Mellon Asset Management: To a great extent the poor performance of the enhanced money market products was related to conditions in the credit market. Some of these products were taking on more and more credit risk in an environment of tight spreads when returns in credit were contracting. They were then caught out when problems in the credit mar-kets arose. I am not sure it was a bull or bear market phenomenon. I would say it looks more like a classic credit crunch.

‘Both sides, the private banker and the factory, didn’t explain clearly that these products were for bull markets. I don’t think we gave this message’

Iñigo Bilbao-Goyoaga,Axa Investment Managers



‘There are many vehicles in the market which are registered in Luxembourg, Dublin and the Cayman Islands, so it becomes diffi cult to bundle all this data together so it could read as third party numbers’

Pablo Anabitarte,Fidelity International

EDUARDO SÁNCHEZ, Inverseguros GestiónSGIIC: I don’t think that money market funds have died. All the asset classes had problems last year. Last year there were net outfl ows of €20 billion in the Spanish indus-try and it was not only the money market dy-namic funds. It was also from money market funds, the lowest risk funds, they lost assets as well, as did equity funds. It was in all the categories, both because there was a crisis in August and because Spanish investors are highly conservative, more than anywhere else in Europe.

You can see from the fi gures on pension funds that here in Spain, allocation to equi-ties is the lowest in Europe and investors have gone into deposits.

JAIME PÉREZ-MAURA: It is very diffi cult to understand the nature of third party fund fl ows. But usually any client’s exposure is broken down into 50% equity, 25% fi xed in-come and mixed assets, with the rest being invested in money market dynamic funds.

It’s very important to understand that if we are currently suffering from big outfl ows it’s because a Spanish institution buys third party funds in all asset classes except the money market asset class, where margins are usually lower and because Spanish institutions manage them themselves.

So if we see outfl ows in the money mar-ket dynamic sector and investors go back to cash, the money exits the third party fund circle. I am not too sure about the direct ef-fect from the credit crisis but most outfl ows

are related to its indirect infl uence on the money market dynamic funds where people have had a great increase in exposure over the last three years.PABLO ANABITARTE, Fidelity International: It is also necessary to look at the accuracy of the fi gures that are publicly available. I know we can second-guess to a point, but this is tricky given that sometimes even Latin American assets are booked through Spanish platforms.

There are many vehicles in the market which are registered in Luxembourg, Dublin and the Cayman Islands, so it becomes diffi cult to bundle all this data together so it could read as third party numbers. This is also because Spanish houses have foreign domiciled funds, so we might be lacking con-



sistency. Some transparency in the industry – to clarify who is selling what and how this works would be helpful in terms of competi-tion, but this is not that easy, so we need to look at the fi gures with some suspicion.

Looking at open architecture and third party fund demand, there are two types of demand: tactical and stable. The tactical demand uses a third party fund as a com-ponent of a wrapper. Going back to the year 2002, when it was trendy to use mutual funds to underlie guaranteed funds. Some groups played that game and saw a large growth in assets. The second type of de-mand is the one generated through correct advice and I agree with Jaime when he says that a correctly sold equity product tends to deliver a more stable asset base.

There are some houses that have been successful because they have brought out fashionable products to the market and these houses have seen a good asset growth. Others have sold equity products having received good advice and have also seen growth as a result.

It would thus be important to understand what the real underlying demand is: does

the Spanish customer want choice and third party funds to complement the existing offer? That’s what we should ask in order to read 2007, and what 2008 and beyond will bring.

JAVIER KESSLER, KAFondos: The main issue in Spain is to develop the demand side. Since the nineties the whole fi nancial market in Spain has seen enormous devel-opment.

We are at the point where we have reached a top quality offering in funds, but at this moment the industry has not found the appropriate demand.

This is because private investors don’t fully understand the ins and outs of mutual

funds, they only understand basic things. So in general, investors are not always properly invested according to their risk profi le.

We therefore have to do our best to foster the connection between industry and de-mand. MiFID constitutes our best opportu-nity to advance in it.

FRITS CARLSEN, Sparinvest: Right now, we find it difficult to get a real grip in Spanish market. We believe an explana-tion of this, is that the market is largely driven by banks advising investors who are predominantly retail. Being a pro-vider of long-term investment products, it has proven very difficult to match this

‘We are at the point where we have reached a top quality offering in funds, but at this moment the industry has not found the appropriate demand’

Javier Kessler,KAFondos



‘Many Spanish investors were very fed up with the performance of the enhanced money market funds and they moved to deposits, because of what deposits potentially offer’

José Hinojo, Renta 4

strategy with the mindset of short-term retail investors.

We have of course seen outfl ow over the last couple of months like everybody else, but the strange thing is that when we are analysing the fl ow of subscriptions and redemptions, we see that institutional client money is far more sticky than retail money. That surprised us, because any re-tail distribution strategy implies precisely the opposite.

The only conclusion we can come up with is that retail investors and their advisors are extremely short-sighted. So the challenge for newcomers and long-term investors like ourselves, is to identify the right investor type for our products – this in itself is not an easy task at all

these days.Will there be a large demand for third party

funds in Spain? Of course there will – there is no turning back. Having said that, we also think that newcomers to the Spanish market really have to think twice about their distribu-tion strategy. The retail client segment may not prove worth the effort – especially if one’s investment horizon is even slightly longer than a couple of months.

SASHA EVERS: Coming back to Noemi’s point, I think that the problems that we have witnessed amongst the enhanced money market products is a trend right across continental Europe – it is the same in France, Italy and so on. The fl ows are very similar and the behaviour of clients is also comparable. In this sense I don’t think

there’s anything unique about what has happened in Spain within the context of continental Europe as a whole.

JOSÉ HINOJO, Renta 4: I think that with the liquidity crisis that we have seen in August, many Spanish investors were very fed up with the performance of the enhanced money market funds and they moved to deposits, because of what de-posits potentially offer.

I think this is the biggest problem for our sector. I have to say too, that the funds lost their tax advantages, which have been matched to other savings instruments, and investors have transferred their money to other products, such as deposits.

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‘It makes sense to launch new products in order to create a track record, but I don’t see a large appetite for new ideas right now, apart from structured products’

Jaime Pérez-Maura,Allfunds Bank

opinion, assets are decreasing as a whole, but in the long-term there is an upturn in the industry and third party funds, therefore this is the stage where we must fi nd stable investors. So we have an educational issue with the retail clients, as Pablo mentioned earlier. Nevertheless, the longer-term trend is positive in my opinion; thus we need to watch carefully the issues regarding tactical demand, since the overall trend is still bullish.

ANGUS FOOTE: Iñigo, you wanted to raise a point that follows on from comments made by Pablo and Victor – the issue of timing. I think the way you phrased it was: ‘When is the right time to invest?’ It sounds a very simple question, but is it one that is central to this discussion?

IÑIGO BILBAO-GOYOAGA: Pablo raised this issue and I think it is key in our industry: that when people move into equities they do it at the wrong moment. One of our competi-tors has a big advertisement showing a chart labeled ‘equity indices’ and they ask: ‘Do you think there was any wrong moment to invest?’

If we really want to guide clients on open architecture – guidance is what our clients are looking for – we need to give them this type of advice. Maybe there is no really bad time to invest, but maybe the money you are investing is the money you wanted to buy a car with, or something in the short-term.

So investors need guidance to make sure that the money they put into equities is mon-ey they not going to reclaim in the next two or three years. Then if we give the right message to clients, we will not see them going into money markets, extending into equities and being there at the wrong moment.

ANGUS FOOTE: Now I know the past year divides, probably quite neatly, into two but how has product development been infl u-enced by the increased availability of third party funds?

FÉLIX LÓPEZ: It has been interesting that in the past six months, while the assets – as we have been discussing – have dropped signifi cantly in some types, the demand for new products, in my opinion, has increased dramatically. However, this demand is based on just one thing and in my case the basic factor, as always, is performance.

So in the last three to six months we have had a big demand for new assets, new alterna-tive assets, commodities, quantitative prod-



ucts and emerging markets products.With all the alternatives that we have in

Spain in this area, it is the third party fund companies, the foreign players, that probably have bigger in-house resources and could be where we could fi nd growth in the next couple of years.

We have seen the launch of new products in terms of commodities, where many people believe we are in a long cycle. This is also the case in emerging markets, quantitative and alternative products and the new hedge fund industry that we have in Spain.

I think that the demand for new products is not going to fall, it’s probably going to rise during the next year. The large players and also some small, but talented boutiques have a big opportunity in that area.

JAIME PÉREZ-MAURA: I think people are saturated with an oversupply of products and it might not be the time now to intro-duce new ones. Many of our clients do not want to hear about new products.

Talking to clients after the summer crisis, we observed a clear demand for advice. The client was interested in understanding what was happening and how to face it. You can now see, especially in the fi rst half of the year, that it’s going to be very tough from the new launch perspective. But the show must go on and we understand why provid-ers are introducing new funds.

To take the 130/30 funds as an example: It’s great to see an increase in the number of these entering the market, but clients will need time to digest them. Victor talked about the current sentiment and it is certainly not the best one, but over the long-term, open architecture and anything that has to do with third party funds will defi nitely be implemented across fi nancial institutions eventually.

There’s also something which has been discussed in other countries regarding big banks outsourcing or selling their asset management divisions once it becomes clear to them that their edge is on the distri-bution rather than the production side. We will eventually see that debate in Spain as well and it will result in a more rationalised product offering.

In the meantime, we understand the need of some providers to launch new products because they have identifi ed good ideas and the instruments with which to sell them. It makes sense to launch new products in or-der to create a track record, but I don’t see a large appetite for new ideas right now, apart

‘Now we have Ucits III funds, alternative investments, there’s a lot of things that can work well in a certain environment. There is always a fund for each environment’

Víctor Alvargonzález,Profi m



from structured products and the arrival of the fund of hedge funds into the Spanish market.

SASHA EVERS: We also have to talk about client segmentation when we discuss product development. The question here is: Is this product being developed predominantly for retail distribution, wholesale fund buyers or the institutional marketplace or a mixture of the three?

In our case we are developing a lot of Ucits III products. Some of these are predominantly aimed at the wholesale or institutional segment. Other products have potentially a wider appeal across the differ-ent segments.

With regard to the concerns about the increasing sophistication of products we would say that institutional investors and wholesale fund buyers are highly capable of analysing an options-based strategy on currencies or analysing a GTAA product and making a decision. When we design the product we have in mind the client segment that the product will be suitable for.

VICTOR ALVARGONZÁLEZ: Apart from that, which is very, very important, I would say that in France it is a bit like being in fashion, there’s a fund for every season. Every year since I have been working in this area, even from 2000 until 2003, there was a good idea – small companies, fi xed income, absolute return, etc. Now we have Ucits III funds, al-ternative investments, there’s a lot of things that can work well in a certain environment. There is always a fund for each environ-ment. So I think the problem is not so much that you cannot promote ideas, rather the challenge is to match the idea to the market situation.

RAFAEL HURTADO: Some funds are basically a marketing product and the brands need mar-keting campaigns and for this, they need new ideas. Whether they are agriculture, convertible bonds or high yield – they need new concepts.

In the process of creating new funds, the role of third party funds is very impor-tant. For example, take the case of Banco Popular, it is now launching a convertible bond fund, but because we don’t have the expertise and the fund at the beginning is too small, we are going to build the portfo-lio with third party funds.

We have a large range of emerging market funds – Latin America, Eastern Europe, Russia – and these are funds of funds, because we

‘We have to bring new ideas into the market if we want to sell more. In Spain, for example, we have seen the emergence of the hedge funds industry’

Noemi Said,BBVA



don’t have enough expertise and we want to offer good rates. You have to be honest with the client and if you don’t have the expertise you have to go to third party funds.

PABLO ANABITARTE: We should distinguish between products and concepts. If I launch a European equity fund I am just launching a product. There is no innovation – it might refl ect my views, my own management style and so on, but it is not a concept. So yes, maybe we are seeing a saturation of prod-ucts as all asset classes already seem to be covered.

On the other hand we have what I call a concept and I believe the market is ready for concepts. VAR was one of them, so if you didn’t have a VAR approach you were out of the market. I think Reits, life-cycle funds and thematical funds are in this line and there will always be room for new concepts which can fi ll the gap between asset classes.

Conversely, last year we were extremely successful with three plain vanilla products:

Germany Funds, France Funds, Iberia Funds and Telecommunication Funds. People spot-ted that Germany was a good place to invest. There was zero innovation there, but it was a product that suited the current asset alloca-tion.

This is why it really concerns me when peo-ple say, ‘Well, we want innovation and new products’. That is a good hook to sell, but it is probably not the key component of a portfolio.

NOEMI SAID: In Europe we have seen many launches of funds, probably some of them weren’t great but brought new ideas, such as thematic funds and so on and they had a great success in increasing their assets under management.

Actually I think according to Feri’s data, about 80 per cent of net sales went into those new ideas. Funds that had only six or eight months of history, have huge amounts of assets under management. Meanwhile the backlist, constituted of about 30,000 funds, only took around 20% of that share.

We have to bring new ideas into the market if we want to sell more. In Spain, for example, we have seen the emergence of the hedge funds industry that Felix was talking about, and by October 07 there were around 30 asset managers in Spain that wanted to start managing fund of hedge funds, and ten new asset managers were constituted for that purpose.

So I think there is a demand for new categories and strategies (specially in alter-native assets) and obviously the numbers can show that. According to CNMV, AUM in hedge Funds accounted for more than €650 million last year. Regarding business de-velopment, I think teams are now working very hard, because in moments of market turbulence you have to fulfi l your client’s needs and constraints and it’s diffi cult. So the importance of the product development teams is going to grow in the future.

SASHA EVERS: I agree with Jaime that in-creasingly over time there will be a division



‘I would like to mention a word of caution! When do fund management companies tend to launch new products? The answer is: when it is trendy’

Frits Carlsen,Sparinvest

in the asset management industry between manufacturers and distributors. We are already seeing examples of this both in Europe and the US and the trend is clear.

FRITS CARLSEN: Coming from the Sales and Marketing Department of my fi rm I would like to mention a word of caution! When do fund management companies tend to launch new products? The answer is: when it is trendy.

That has often proven to be at precisely the wrong time to advise your clients to invest. You always have a good marketing opportunity when you have some perform-ance fi gures or general market consensus to back it up, and this is precisely not the time to invest. But we think that providers will focus more on launching durable invest-

ment concepts rather that ‘fl avour-of-the-month’ products simply because it will be more profi table in the end for both clients and their advisors.

Aggressive marketing departments can always fi nd something to market. All they need to do is to present a product with a great previous three years, put some spin on a story and then retail investors buy it, burn their fi ngers and we are back to square one with a bad reputation.

RAFAEL HURTADO: I have the theory that in our industry marketing is as important as alpha. Value added by marketing is huge.

JOAQUÍN CASASÚS: From the asset manag-er’s point of view, they always need a mar-keting idea, I completely agree with Rafael

and as Frits says, a marketing idea starts working when the performance is already very nice. I think, from the investor’s point of view, it’s very important to have that back to basics idea – that has always worked.

My demand, as a person looking for good funds, is to have good, plain vanilla funds where I can rely on the performance being consistent and superior. For example, for me, trying to buy a good US equity fund has been a nightmare for some years. Now I am almost surrendering and buying ETFs for that asset class. That is probably the biggest one in which I want to invest now. In Europe we tend to build very complicated guaranteed products, structured things, in-house or dynamic cash funds – in these things Americans are much more straight-forward.



NOEMI SAID: I would like to defend the role of fund selectors actually. Our role as fund selectors is to be a goalkeeper, to see what’s coming and recommend those products that succeed through our process of analysis.Obviously there are many good marketing campaigns, but that doesn’t mean the funds that are being publicised are necessarily good or bad.

For example, we are hearing about cli-mate change, water, clean energy, new sec-tor or thematic funds. These new products have had very good marketing campaigns and the performance has been quite good and if you put them in a portfolio you will see that they reduce volatility because they are very good for diversifi cation.

We’ve also analysed a sample of 130/30 funds, which have also had a very good marketing campaign but there aren’t any assets under management and we barely invest in them. We don’t see a clear trend in terms of assets increases, we don’t see overperformance – actually it’s the reverse, we observed a general underperformance in the sample we selected.

So I think our role is to be selective and not distracted by marketing campaigns. The way that we approach new sectors and ideas, at least in my team, is that we have an analyst who is a specialist only in thematic and sector funds. So her role is to look only at those funds and to recommend them for different clients.

We also launched a fund of funds called, Quality Mejores Ideas in which we invest in all those good ideas. Our aim is to try to beat the MSCI World through a thematic approach rather than through geographic diversifi cation. The fund is still small in size but performance has been very good.So I think, yes, there is a place for thematic funds, there is a place for funds that have very good marketing, but they need to be good funds and our role is to identify them in order to recommend only the good ones to our clients.

ANGUS FOOTE: I would just like to ask all of you: What you see as the biggest challenge for you over the coming year, and the big-gest potential change we might see over the coming year in terms of the way you do business and the way the market works?

EDUARDO SÁNCHEZ: Now the challenge is the negative sentiment because of the gen-eral economic situation. Therefore now is the moment to fi nd alternative investments

‘I have the theory that in our industry marketing is as important as alpha. Value added by marketing is huge’

Rafael Hurtado,Grupo Banco Popular



‘Now is the moment to fi nd alternative investments that can do well at a time when we expect markets to perform poorly’

Eduardo Sánchez,Inverseguros Gestión SGIIC

that can do well at a time when we expect markets to perform poorly.

We need to look at hedge funds and see if they are going to deliver good performance, as they did in 2000, 2001 and 2002. A lot of hedge funds have been launched in Spain and I think that there is an appetite for those products, but we need to see if they can do well this year.

JAIME PÉREZ-MAURA: We are going to spend a lot of time and effort on the chal-lenging adventure of the fund of hedge funds that are going to be launched into the Spanish market.

All major institutions in Spain are very focused on this and on how they are going

to deliver that product within their own distribution lines and of course, the change in sentiment is pushing demand forward.

We are observing a clear change in atti-tude since the end of last year. I believe that it is going to last until the summer, when we will probably see a turning point.

IÑIGO BILBAO-GOYOAGA: The challenge is clear: it’s the markets, what will happen, will it change after the summer? I think the debate on hedge funds is still premature. I think we have a clear debate on equities in this country, I think people still don’t have an equity attitude to the market and to talk about hedge funds is premature.

NOEMI SAID: I think MiFID is going to be something important in Spain. We need to know how it is going to be applied here.

Something that is going to be very impor-tant is the advice that we give to our clients: what kind of advice and what kind of infor-mation we need to provide. Maybe we will have to change the way we do things now and obviously we will see an increase in the open architecture industry. For a defensive market like the Spanish one that is going to be a challenge.

SASHA EVERS: For this year, I would put the emphasis on providing quality client service. The primary focus in this volatile market environment will be to stay close to



‘We are in a fi duciary business, we have to be transparent and communicative with our clients especially when markets are diffi cult’

Sasha Evers,BNY Mellon Asset Management

the client. We are in a fi duciary business, we have

to be transparent and communicative with our clients especially when markets are diffi cult. The communication of information about what products are doing and why, is key in this environment.

CARLOS FERNÁNDEZ: Take care of your clients and their needs. The challenge is obviously one of sentiment and psychology that has evolved in recent months.

The biggest challenges, at least in terms of products,will be trying to blend two totally different strategies: total return products with back to basics. These are two different concepts that we have to mix in this year: a very diffi cult task.

RAFAEL HURTADO: Europe has been in a dif-fi cult environment. I hope that by the end of the year equity will be at a higher level than today. The coming year will be about back to the basics and within that we will send ex-perts to teach the branches how to sell the product, how to explain the risk advantage. In Spain this year, it will also be the year of the fund of hedge funds and hedge funds, but there is a very short track record.

JOAQUÍN CASASÚS: The Chinese word for crisis is made of two symbols, danger and opportunity and in this environment, even though the economy and the markets are go-ing to suffer, we have a lot of opportunities.

Probably today the newspapers have already done the work for you and the client is already expecting the worst. At least we have done our homework and we are ready, and rather than just hide, I think this is the best time to teach the clients how to react in this kind of environment.

VÍCTOR ALVARGONZÁLEZ: One short-term challenge will be to show people that there is always a fund or portfolio of funds that is going to do better than deposits. It is quite diffi cult to make people understand that.

A long-term challenge would be advice, because that’s the oil that makes the machine work between producers and investors of all kinds. We don’t have this oil in the right place, or working as nicely as it should, but it will be. MiFID is a challenge also, because if it’s well transposed it’s go-ing to be very good for us, for the industry and for the investor in Spain. But as it looks like it is not going to be very well trans-



posed, it is going to kill advice. It’s good for us, for example for com-

panies that are big enough in the advice sector, but if not ,it is going to kill off all the small advisers.

PABLO ANABITARTE: I see the biggest test in how the industry faces MiFID. Also, given the current credit environment, the banking industry might face huge chal-lenges which might possibly trigger some form of consolidation.

The third challenge might be one relating to the credibility of the fund industry: 2008 is going to be an extremely diffi cult and challenging year and it won’t be helpful to see excessive sophistication, some kind of long-term capital type of risk product coming out to the market, triggering huge doubts on the types of product we provide.

FÉLIX LÓPEZ: There are going to be great winners and also great losers in the in-dustry this year. Probably the winners are those who could adapt to the desires of the client, which are in the long-term, based on capital preservation.

Alternative products such as hedge funds, will see a period of bad returns and will be the greatest winners – not this year but probably in the next two to fi ve years.

FRITS CARLSEN: Our challenge is to remain faithful to our conservative belief at all times, to stick to our guns, to not fall into the trap of launching products only because they happen to be in favour at a given time. On the marketing side, I agree that MiFID is a potential threat.

JOSE HINOJO: At this moment we are seeing a swing in the markets and I think taking care of clients’ portfolios is very important. I also think it is important to look for alterna-tive products that conserve the capital of the clients.

JAVIER KESSLER: One of my wishes for 2008 is to see a proper development of the advisory industry. The second one is to reach a higher grade of transparency among asset managers, transmitting infor-mation and knowledge to intermediaries and fi nal clients.

Citywire Fund Selector is published by Citywire Financial Publishers Ltd. 1st Floor, 87 Vauxhall Walk, London SE11 5HJ. Tel: 020 7840 2250. Fax: 020 7840 2251 cfi @citywire.co.ukPrinted by Printech Europe Limited. Distributed by Data Run©Citywire Financial Publishers Ltd 2008Copyright of this material is owned by Citywire Financial Publishers Ltd (“Citywire”). No part of this material may be copied, reproduced, distributed, stored or adapted in any form or by any means without Citywire’s prior written consent. Unauthorised copying, reproduction, distribution, storage or adaptation of any part of this material is in breach of theCopyright, Design and Patents Act 1997 and may give rise to civil damages and criminal penalties. Citywire Fund Selector™ is a trademark of Citywire Financial Publishers Ltd.Reproduction of the Citywire Fund Selector ™ database is also subject to the Copyrights and Rights in Databases Regulations 1997. All material in Citywire Fund Selector™ has been issued by Citywire Financial Publishers Ltd (“Citywire”) 1st Floor, 87 Vauxhall Walk, London SE11 5HJ. Citywire Fund Selector™ is directed at persons having professional experience in matters relating to investments and any investments or investment activity with which it deals should only be used by such persons or investment professionals. Persons who do not have professional experience in participating in unregulated collective investment schemes should not rely on material relating to such schemes. Citywire is authorised and regulated by the Financial Services Authority to provide investment advice and is bound by its rules. Material contained in this publication is for general information only. No advertisement or advice given amounts to a personal recommendation. Individual circumstances vary and you should seek your own advice on the suitability to you of any investment or investment techniques that may be mentioned. Citywire does not accept any liability for any loss suffered by any reader as a result of such a decision. Persons associated with or employed by Citywire may hold positions or take positions in investments referred to in this publication.Citywire operates a policy of independence in relation to matters where the operators may have a material interest or confl ict of interest. Unregulated collective investment schemes are not available to private customers. Citywire Financial Publishers Ltd. is authorised and regulated by the Financial Services Authority no: 222178 to provide investment advice and is bound by its rules. Citywire Financial Publishers Ltd. Registered Offi ce: 1st Floor, 87 Vauxhall Walk, London SE11 5HJ Registered in England no: 3828440

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