Tuesday, October 20, 2020 | Stamford, CT USA — Banks, financial advisors, insurers, and other companies that distribute investment funds say COVID-19 has triggered profound changes in retail investing—some temporary, and some that could prove permanent.
A small group of asset managers—including Allianz Global Investors, Pictet Asset Management and J.P. Morgan Asset Management in Europe and Allianz Global Investors in Asia—have set themselves apart from competitors by helping fund platforms and retail investors navigate these changes with exceptional service capabilities and stability in crisis. These managers are in Overall Asian and European Intermediary Distribution.
Retail Investors and Platform Gatekeepers Seek Safety Over Low Fees
Fund distributors reveal that retail investors in Europe and Asia initially reacted to the pandemic quite differently. While distributors in Asia saw a classic flight to quality in retail portfolios in early 2020, fund distributors in Europe reported continued, strong demand from retail investors across the risk spectrum.
“Over the last six months, as markets began to stabilize, these differences in demand in Asia and Europe have dissipated as retail investors reverted to something closer to pre-COVID-19 investment patterns,” says Greenwich Associates Relationship Director Mark Buckley and co-author of Amid COVID-19 Disruptions, Manager Brand Recognition is Key on Retail Fund Platforms.
In Asia, the global shutdown triggered another type of flight to safety. In the midst of an unprecedented interruption of normal workflows and a historic surge in market volatility, gatekeepers for fund distributors began gravitating to the biggest, most-well established and presumably “safest” managers.
In Europe, fund distributors say they have gravitated less to managers with the strongest brands, and more toward managers they see as having the best products and risk management capabilities to help clients solve individual problems and get through the crisis.
However, European platform gatekeepers are in full agreement with their peers in Asia on one point: At this point in the cycle, fees take a backseat to managers’ ability to deliver for retail clients in volatile times. In 2019, fees ranked as gatekeepers’ number-two criteria when picking managers for platforms in Europe, and number-three in Asia. During the pandemic, fees plunged to 13th place in Asia and eighth place in Europe.
ESG is Here to Stay
Any speculation that the COVID-19 crisis would derail the movement toward environmental, social and governance investing can now be put to rest.
“Even if retail investors were to set aside their ESG concerns in the face of market volatility, asset managers will still have to meet the demands of fund platforms and gatekeepers who remain firmly committed to ESG adoption,” says Greenwich Associates Relationship Director Parijat Banerjee and report co-author.
In both Europe and Asia, the share of fund distributors requiring managers on their platforms to have a “clearly articulated ESG approach” increased from 2019 to 2020. Approximately three-quarters of European fund gatekeepers and about 60% of gatekeepers in Asia predict that managers without a clear ESG policy will be excluded from their platforms by 2025.