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London: Top fund executives meeting in Barcelona this week will debate how to attract assets from sovereign wealth investors and the merits of absolute return funds as they face up to a tough environment of lower inflows.
The three-day Fund Forum International 2008, beginning tomorrow, comes during the asset management industry's toughest period since the bear market of 2000-03, as the credit crisis that began last summer and choppy markets hit investor confidence.
"It's not a great time for new business. People are sitting on their hands," said Robert Lloyd George, chief executive of Lloyd George Management, which runs $12 billion in Asian and emerging market assets.
"There is a lot of... fear about where the UK economy is going."
Fund firms profit during bull markets because investors tend to put more money into funds while overall assets, on which they earn fees, rise with markets.
During bear periods fund firms are often hit as markets fall and investors withdraw cash.
Retail fund sales have been poor in recent months. Sales of UK tax-advantaged Individual Savings Accounts (ISAs) in the traditionally busy ISA season were the worst on record this year, although retail fund sales rebounded in April.
Shares of listed fund firms have been battered.
Falling fortunes
New Star Asset Management is down 77 per cent over the past year while Aberdeen Asset Management has fallen 34 per cent and Schroders is down 29 per cent, compared with the FTSE All-Share index's 17 per cent drop.
Executives will now increasingly be looking to sovereign wealth funds, which tend to invest with a longer time horizon and which have recently come to the aid of a number of banks hit by writedowns on subprime loans, to take up some of the slack.
These huge state-run investment vehicles, which hold assets of between $1.9 trillion and $2.9 trillion according to the US Treasury and which have been swelled by oil reserves and trade surpluses, already invest with some UK asset managers but are set to deploy more cash.
"They are clearly an emerging factor. I think they will continue to present opportunities to asset managers," said Erich Gerth, chief executive of Janus Capital International.
For instance, the China Investment Corp, set up last September, is building up operations that will see it deploy $200 billion of the country's foreign exchange reserves in order to generate investment returns and has recently been in talks with a range of overseas asset managers.
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