Edhec European Asset Management Practices Survey

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Press Release Edhec European Asset Management Practices Survey On May 21st, Edhec presented the first edition of its survey on the practices of European asset management firms: “The Edhec European Asset Management Practices Survey” in Haberdashers’ Hall in London. The survey aims to assess the application of the latest academic and professional research results within the European asset management industry. A representative sample With more than 60 respondents spread over all the major European asset management zones, representing 6.211 billion euros under management, the Edhec European Asset Management Practices Survey drew on a representative sample of the leading European asset management companies. A strategic analysis The Edhec European Asset Management Practices Survey compared the responses of the investment company managers with the results from academic and professional research, which Edhec monitors on an ongoing basis through its Risk and Asset Management Research Centre. Edhec questioned European managers on three major strategic themes: − Management offerings and processes − Risk management − Technological choices More than 135 pages of analysis and the participation of specialists from both the academic and consulting worlds make this report a reference document today on the strategies and practices of European asset management companies. Principal results The following are among the main conclusions that can be drawn from the survey: • In spite of the economic difficulties and strategic thinking on critical size, the consolidation/specialisation movement has not yet taken place. Most asset management firms position themselves as “generalists.” • Passive management offerings, especially ETFs, have made a spectacular breakthrough. They now represent 23% of the “equity” management offerings. • The progress of passive management offerings has been encouraged by a new approach to global portfolio allocation from institutional investors, who distinguish between a passive core-portfolio (which therefore has very low management costs) and very active satellites (which therefore have very significant tracking error). This new approach allows the management fees of active management to be reduced by up to three times. • Alternative investment is today perceived more as a diversification class (54%) than as an investment that outperforms traditional investment management (17%). • In view of the interest in structured management expressed by 65% of the respondents, there should be a considerable increase in the use of derivatives in asset management, in order to offer new risk profiles which correspond more to the expectations of investors. This usage will be favoured by the provisions of the new UCITS3 directive, which will come into effect in February 2004. • In the area of management processes, while most investment companies, with the exception of those in the United Kingdom, favour asset allocation in their process (64% of respondents have a top/down management process), it should be noted that the techniques used to implement the allocation and construct the portfolios have not yet integrated the results of the research: the benchmarks are very often market indices; only 22% of the respondents take extreme risks into account in constructing the portfolio; quantitative tactical allocation, which is favoured by researchers in the area of building out-performance, is only used by 17% of the respondents. • In measuring manager performance, and in spite of criticism, notably in the Myners report, peer groups remain very widely used (51%). More generally, performance measurement has not benefited from the conceptual advances and multi-factor technology that asset management firms have implemented for portfolio risk management. Risk management will constitute one of the investment priorities for European asset management firms in terms of human and technical resources. In the next few years, asset management firms will concentrate on improving compliance (60%), measuring the extreme risks of portfolios (46%), evaluating off-balance sheet positions (52%) and reporting on risk to clients (71%). The aim of these investments is to cope with the fact that asset management firms are lagging behind banks, in relative terms, because there has been no regulation to date that has encouraged them to set up internal risk measurement models. For example, only 51% of the respondents currently monitor the extreme risks of their portfolios. • Operational risk, in spite of the future Basel II and CAD III regulations, is not yet on the agenda of asset management firms. Only 50% of the firms feel concerned by this issue and 82% have not examined the question of setting up an internal model for evaluating operational risk. • In the area of technology, it seems clear today that asset management firms have chosen a “best of breed” approach rather than integration. Only 14% of the firms have an integrated front-to-back system and only 17% have an integrated front office software package. • Risk management, complex position-keeping including derivatives, and the order book are the drivers behind asset management companies’ investment. In spite of the economic slowdown, they are not intending to relax their investment efforts. 47% of them plan to redesign their application or technical architecture in the next two years. A strategic partnership The Edhec European Asset Management Practices Survey could not have been produced without the active support of Misys Asset Management Systems and EuroPerformance. The survey is also the result of active co-operation between the Edhec Risk and Asset Management Research Centre and Misys Asset Management Systems, through an ambitious research programme on the analysis of practices and research in the area of multi-style/multi-class asset allocation. This partnership led to a joint research centre being set up, located in Sophia Antipolis (France). EuroPerformance, a subsidiary of the leading French group in the field of financial information, Fininfo, is closely associated with Edhec in a research programme on style analysis and fund performance measurement. Statements from the managers On the occasion of the presentation, Chris Potts, CEO of Misys Asset Management Systems, said, “We consider that the co-operation with Edhec gives us a competitive advantage because it allows a company like ours to anticipate the future needs of the market and thus serve our current and future clients better.” Frédéric Picard, managing director of EuroPerformance, said, “The partnership with Edhec is part of our core business as an information agency for investment funds. The evolution of the risk and performance measurement methodologies on which we are working will allow us to offer the market innovative fund rating and fund style analysis approaches.” Olivier Oger, managing director of Edhec: “Finance is an essential academic discipline for an internationally-oriented business school like Edhec. The research carried out by the Risk and Asset Management Research Centre, led by Professor Noël Amenc, constitutes a reference both for the academic visibility that it gives our institution and the business interest and partnerships that it gives rise to.” Contact: to receive a copy of the Edhec European Asset Management Practices Survey, please contact: Carolyn Essid – Tel.: +33 (0)4 92 96 89 50 – e-mail: [email protected] or consult our web site: www.edhec-risk.com About Edhec With 90 permanent professors and more than 3,000 students spread over two campuses in Lille and Nice, the Edhec Group is in fact the largest of the major French business schools. Established in 1906, Edhec has been one of the top five business schools in France for several years. Edhec’s financial research laboratory, the “Edhec Risk and Asset Management Research Centre,” carries out major research programmes in the areas of asset allocation and risk management in both the traditional and alternative investment universes. About EuroPerformance EuroPerformance is an agency which measures and analyses the performance of European mutual funds (OPCVM). Our business is structured around three activities: − Publication of fund data on a daily basis − Producing performance rankings and monitoring assets under management, subscriptions and market share − The supply of software solutions for reporting performance and selecting funds EuroPerformance is a subsidiary of the Fininfo Group. About Misys Asset Management Systems Misys Asset Management Systems is a leading supplier of IT solutions to the global asset management community. With over 85 international clients, our IT systems enable fund and operations managers to control hundreds of billions of euros of private and institutional wealth. We are known for our well-established products: − Apollo and Altimis - for investment management processes − Quasar and Fiscal - for operational management processes Misys Asset Management Systems is a subsidiary of Misys plc, a FTSE 250 company. Document Outline
  • Edhec European Asset Management Practices Survey