The managing director of Nomura Asset Management UK, Peter Ball (pictured), talks to Expert Investor about fund distribution trends in light of covid-19.
Q: The covid-19 crisis is likely to put institutional investors under increasing liability pressure. What will this mean for the development of the asset management industry? Do you expect consolidations in Europe going forward as a result of economic pressure?
Naturally, the significant fall in markets is unlikely to help asset managers’ profitability.
It is much harder to influence fund buyers to buy your product when you are unable to meet them face-to-face. Although challenges lie ahead, there are also opportunities to thrive in today’s environment – it is remarkable how quickly the industry has embraced emerging technologies to engage, build trust and attract clients.
We will continue to see further consolidations, as scale helps mitigate fixed costs. However, in my view, this is part of an ongoing trend rather than the impact of the coronavirus crisis being the key catalyst – it is more of an additional factor that might enable more deals to occur.
Q: Nomura has just cut fees for its funds. As investor focus on price will probably increase with covid-19, are you considering more changes in your distribution models to meet this demand?
Investors and their advisers have been focussed on fees for as long as I can remember. I see this long-term trend continuing rather than covid-19 being any sort of fee catalyst.
In terms of adapting our distribution approach, we have focussed on our Global Dynamic Bond Fund. As a result, it has become a market leader among strategic bond funds, having risen to over $1.6bn (€1.4bn) from $320m when I joined the firm [in September 2018]. Additionally, we introduced a fee of 10bps for funds under $150m.
We have a range of Nomura strategies with plenty of capacity and, for the last year, we have been promoting the strategies of our sister company American Century Investments in the UK and elsewhere across Europe.
My strategy is now firmly in place and I do not see the need to make any further changes.
Q: A survey has found that direct-to-consumer sales are likely to increase in the next five years, together with online distribution of funds, and may become the most important channel. What type of distribution channel do you believe will win in the next five years given the overall pressure to offer low prices and why?
We have been working hard to ensure our funds are on the many platforms available. There is still some work to be done to ensure our products are available everywhere.
We believe this is a key channel now and over the next five years; and we and our clients are pushing for Nomura to be more widely available.
Q: European investors in particular are seeking to invest in sustainable finance. Should asset managers promote ESG/impact funds? Should they price them higher or lower than regular funds?
Our global equity team has a real focus on environmental, social and governance (ESG), and also runs a Global Sustainable Equity Fund.
We price the products the same and we think this is the right approach. Clients get to choose which version of global equities best suits their needs.
It shouldn’t be a price decision, but a philosophical view on how you want your assets managed. Our Global Sustainable Equity Fund is new, so it is priced at 10bps by Nomura.
Right now, those looking for a sustainable fund can get one much lower than standard global equity pricing.