Managed accounts, which have grown tremendously in the past couple of years in the U.S., have started to emerge as a significant offering around the world, especially in Europe, and are poised to grow even more in 2002, according to Cerulli Associates latest report on year-end reflections and projections on the global front.
"Cerulli Associates asserts the future is bright for this market segment as mass-affluent investors seek capital growth combined with diversification and private banking-style advisory services, for which they would not otherwise qualify," the report says.
Italys gestioni patrimoniali in fondi (GPFs), which are basically mutual fund wrap accounts, currently account for US$165 billion of the Italian assets in mutual funds, compared to $150 billion in the U.S, according to Cerulli. Although GPFs are less sophisticated than U.S. wrap accounts because they dont have portfolio re-balancing, they are widely accessible, according to Cerulli. Cerulli predicts that GPFs will incorporate foreign products in 2002. San Paolo IMI is one example of a firm that has already done that.
In the U.K., the movement into managed accounts will likely come from private client brokers, according to Cerulli. Killik & Co. is planning to launch wrap account services next year that will target investors with about US$300,000 and Cerulli expects that other firms will do the same. Also, SEI Investments Europe introduced a manager-of managers product that has attracted top investment managers, and Cerulli "believes such solutions will become precursors to managed account programs," the report says.
Wrap programs have become the biggest competitor to mutual funds in Canada as well, although their growth has slowed with the rest of the market, the report said.
In Japan, there several obstacles to managed account growth, according to the report. Banks, which are entrenched in a risk-averse mentality, would have to undergo a shift away from that approach, and firms would have to train their staffs to run the products.
"Japanese investors have little appetite for asset allocation services (a hallmark of managed account programs) and are reluctant to pay separately for advice," the report says.
The Global Wrap Consulting Group, managed account program launched and operated jointly by Nikko Securites and Salomon Smith Barney, has had minimal sales of around US$660 million. Still, Nikko maintains that managed accounts have a long-term value in that as investors become more educated about the products, a stable fee-based business will emerge, according to Cerulli.
The emergence of the multi-manager approach is one element that will serve as a catalyst for managed account growth globally, the report said. Multi-manager and fund-of-funds products currently hold about $569 billion, up 42% from Dec. 1999.
"Clients are warming to the concept of the multi-manager approach because of the risk reduction through style diversification and access to the best-in-class money managers," the report said. "With volatile markets and uncertain world economic conditions, these attributes assume greater primacy investors at all levels are seeking out advice and a more deliberate investment process As financial planners and investors become more accustomed to multi-manager products, they will gravitate towards more specialized programs and those more tailored to their needs."