Third-party assets in ABN Amro Investment Solutions’ funds and mandate solutions have been rising since October 2020, with 30 percent of assets under management now coming from clients other than ABN Amro. Meanwhile, the fund house is focusing on its latest solutions services.
So says Bob Hendriks of ABN Amro Investment Solutions (AAIS) in a conversation Investment Officer had with him and Sustainable Investing Analyst Margot Seeley, on topics such as third-party business, its relationship with ABN Amro and the impact of sustainability regulation SFDR.
ABN Amro is not only an AAIS shareholder, but also the asset manager’s largest customer. When ABN Amro wants a particular solution, fund or manager, AAIS receives a request from the bank’s Fund Centre. AAIS does the due diligence and prepares a list of mandates and global preferred list, based on which ABN Amro’s Fund Centre creates the portfolios. In addition, AAIS maintains direct contact with ABN Amro’s overarching global investment center, sharing its expertise and vision within certain investment committees.
Hendriks estimates that currently about 70 percent of assets under management come from ABN Amro. «I wouldn’t be surprised if that moves toward 50/50 over time, but I don’t have a hard target for that. More important than a percentage, is that we offer the right products for our clients. Above all, I want to grow as a whole. What the mutual percentages are, doesn»t matter to me.»
Solutions service
AAIS’s short-term ambitions are first and foremost to achieve ABN Amro’s goals, as well as: an expansion of the so-called «ESG Originals» offering and an acceleration on the solutions front. Hendriks, on the latter: «Because we see the enthusiasm for this in the European market and because we can deliver it. It makes sense to accelerate there.»
Talks are going on, he says. More and more and at an increasingly advanced stage. «If you want to set up a subadvisory platform yourself that has enough strategies to build the right portfolios, there are a lot of barriers. You need the knowledge, you need time - since you can»t set up that many mandates a year - and you need scale. If you do it through AAIS» subadvisory platform , you don»t have that problem.»
When Hendriks turned to solutions last year after his initial focus on mandate fund sales to third parties, he turned mainly to medium-sized banks. But in practice, he finds that larger banks are also interested. How do these services compare with the third-party business? Hendriks answers that a bank could use both, but the interpretation is different.
As an example, he cites a positioning in the several-billion AAF Parnassus US Sustainable Equities fund. «A large bank can buy that for all its 100,000 customers through the third-party business, where it has to do 200,000 transactions for the sell and buy. But he can also take advantage of the solutions service by creating a building block for US equities under our care, which includes a number of AAIS mandates. Then a switch from one mandate to another takes two transactions creating the same effect.»
As for any difficulties surrounding the sale of mandate funds to third parties because of the AAIS label, Hendriks says that is no more or less difficult to sell than another fund. And that the ABN Amro brand might create resistance among domestic competitors, but on the net it gets positive feedback - especially abroad. «In Italy, for example, I hear that this brand recognition and positive thinking associated with it, has a positive impact. We don»t just focus on the Netherlands, but on the whole of Europe.»
«In general, if you engage in third-party sales, you have to have a good performance the right asset classes and sub-categories that are in vogue, and - and here it comes - you show that your ESG labeling is true to label. In conversations with fund selectors, I notice that they want to know the latter more and more definitely.
Rare managers
In an interview with Investment Officer last year, Chris van Schuppen of ABN Amro specifically mentioned the selection of managers in terms of sustainability, as an asset of AAIS. The Head of Wealth Products praised the expertise of ABN Amro’s asset management arm in that area.
Hendriks: «What we’ve done well from 2014 is almost overly committed to getting companies on our platform that were founded with the idea of ESG investing. Those are rare; there are not that many parties that have been investing in ESG for a long time and have a good track record. Within U.S. equities, for example, there are only seven, four of which we have committed to. Especially with our external sales, I find that it helps that we have a core group with these types of managers, which we call ESG Originals.»
The first ESG original fund was set up in 2015. Today the Paris-based fund house works with the likes of Boston Trust Walden, which started ESG in 1974, and Parnassus, which has done so since 1984.
This article originally appeared in Dutch on InvestmentOfficer.nl