| New entrants help boost indigenous asset management sector |
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| It has been a turbulent year for the Irish fund management sector, with little growth on the world's stock markets leading to poor performance, which in turn put pressure on the viability of the sector going forward. One leading manager, Hibernian Investment Managers, was almost forced to close during the year, and the leading light of the indigenous sector, Bank of Ireland Asset Management had an ‘annus horribilis’, losing several key staff members, and suffering significant capital out-flows. However, the future looks brighter, with new entrants such as Perpetual Trustees Australia Limited, helping to boost the long-term outlook of the sector. |
Although there were fears late last year that Hibernian Investment Manager’s (HIM) parent Aviva, would completely close HIM’s Irish operations following a strategic review of Aviva’s fund management business, which includes Morley Fund Management, the UK based insurance company finally decided just to move the management of international equities to London. HIM is now concentrating on activities such as asset allocation, fund management of bond portfolios, Irish equities and marketing and client servicing. | | Earlier this year KBC Asset Management launched a hedge fund of funds product, the KBC Alternative Master Fund aimed at its pension and charity clients. |
Indeed apart from the 13 members of the Irish Association of Investment Managers (IAIM) - AIB Investment Managers Ltd., Anglo Irish Asset Management, Baillie Gifford Overseas Ltd., Bank of Ireland Asset Management, Eagle Star Assurance Company of Ireland, F & C Ireland Limited, Hibernian Investment Managers Ltd., Irish Life Investment Managers Ltd, KBC Asset Management, Montgomery Oppenheim, Pioneer Investment Management Ltd, Setanta Asset Management, and Standard Life Investments - in this year’s survey 32 other Irish based asset managers participated. Recent additions to the survey include Susquehanna Ireland Limited, Appian Wealth Management, First New York Securities, Fitzgerald Brennan Asset Management and Broadstone Fund Management, indicating the strength and depth that is developing in the Irish fund management sector.
The forthcoming establishment of an Irish office by Perpetual Trustees Australia Limited, one of Australia’s leading fund managers which has over A$2 billion in assets under management, is also a welcome boost to the sector. The new operation, which will employ 16 people, will develop a focused range of active global equities products which will be targeted at the institutional market worldwide and the broader Australian market. This is the first significant fund management start-up in the Irish market since Pioneer came in 1996, and hopefully is a sign of further things to come.
However, one challenge facing the sector is poor returns. After the ‘longest bull market in history’, poor performance is endemic across the industry. Writing on page 19, Ruth O’Briain, managing director of F&C Ireland, and chair of the IAIM says that this, together with the higher cost base and increased compliance load being placed on local market participants, is impacting on profitability in the sector.
Hedge funds
One growth area for fund managers and stockbrokers alike is alternative investments. Earlier this year KBC Asset Management launched a hedge fund of funds product, the KBC Alternative Master Fund aimed at its pension and charity clients. The overall strategy of the fund is market neutral, and it will invest in five different sub-strategies. A fund of hedge funds, KBC has reduced the investible universe for the fund to 50 hedge funds, and at the moment is only using 18 managers. The target on the fund is inflation +3/5 per cent. Apart from HIM’s Templar fund, this marks the first attempt by Irish fund managers to sell hedge funds to pension clients.
While internationally more and more pension funds are allocating to alternatives, Irish based funds have been slow to allocate to hedge funds. It looks like the National Pension Reserve Fund (NPRF), which is run by the National Treasury and Management Agency (NTMA), may be the first to take the step, as it is currently investigating the potential offered by hedge funds.
Apart from benefiting from the brokerage aspects of having hedge funds as clients, the stockbroking industry is also getting in on the act of managing funds themselves. Davy was the first to offer hedge funds to its private clients, through its acquisition of Focus Investments.
NCB was next up, and in October 2003 it launched its initial fund, the NCB European Select Fund, with €25 million assets under management Merrion has launched two hedge funds this year, the Merrion Kinetic Fund, and most recently the Merrion Global Opportunities Fund. Minimum investment in both funds is €125,000. Following the appointment of former Montgomery Oppenheim fund manager Brian Gray, and former NCB bond dealer Mick O’Sullivan, Goodbody also launched a hedge fund aimed at its private clients this year. |
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