Allfunds: Spanish group aims for 10 Italian distribution deals in 2005

When talking about distribution of third party funds in Spain and beyond, it is difficult to avoid Allfunds Bank, a spin-off of Santander’s private banking division Banif, in which Italian house SanPaolo IMI holds a 50 per cent stake.

Only four years after its creation, more than half of the total third party funds distributed in Spain pass through the Allfunds platform. The company also has a presence in Portugal and Latin America and, since the beginning of the year, is making inroads in the Italian market. Allfunds’ menu offers more than 6000 funds managed by 130 management groups, with ?19bn being distributed via its platform.

Juan Alcaraz, Allfunds’s CEO, explains how years of experience in offering open architecture to high net worth individuals and the backing of the Santander group was key for the company’s success during its first years.

“Before launching Allfunds we already had experience in offering the best available products to our private clients,” he says. “Our first goal was to give an integral service to other institutional clients outside the Santander group in any need they may have regarding open architecture.”

No charge

Under three different business lines, Allfunds offers analysis and advice, execution and administration and information about the products they distribute. “The difference between us and other companies in Europe is that first of all, we don’t charge our clients for these services and this concept was something very innovative in the market,” says Mr Alcaraz.

The backing of large financial institutions means Allfunds has the necessary purchasing power to negotiate significant discounts when shopping for funds. “If a fund manager pays us X amount, we keep X minus some basis points and the rest goes to the distributor, our client. This means that if a client goes directly to the provider or the international fund manager he will get practically the same price as he does through Allfunds. So by going through us, he we will get all our services for free.”

According to Mr Alcaraz, Allfunds is fast developing from a distribution platform into a consulting company, solving problems related to advice, execution and information.

Two kinds of service

Within the investment consulting area, Allfunds offers both fund selection and portfolio advisory services. The first consists of creating a range of funds taking into account the needs and restrictions of clients such as private banks, fund of funds, pension funds and any other institutions that want to make investment in funds vehicles. On the portfolio advisory side, the company helps clients to build their portfolio.

Its future growth will involve international developments. Since SanPaolo IMI bought 50 per cent of Allfunds three years ago, entering the Italian market was a natural step for the firm. “Our business model can be exported to Italy 100 per cent,” says Mr Alcaraz. “It is a very similar market where instead of fund of funds they have GPFs, but basically it’s the same.”

During last year Allfunds focused its efforts in getting its services known across the SanPaolo group and at the beginning of this year started operating in Italy where their business already represents ?3bn. “Our projections are to have 10 agreements in Italy by the end of this year and probably get closer to the ?5bn figure in that market.”

The next step, as Mr Alcaraz confirms, is to enter the UK market, where his parent group, Santander, has purchased the Abbey chain of high street banking outlets. “The UK is the next market for us because there have been important changes in terms of legislation and we think that depolarisation will help the development of open architecture, which until now was exclusively in the hand of the IFAs. This is a huge opportunity for us and we can help institutions entering open architecture in the UK. Our goal now is to find a local team and create Allfunds UK and we want to do it during this year.”

But it will still be up to Abbey to decide its own strategy in terms of product delivery.

“I think we can offer Abbey a lot of added value, but they have first to define their strategy in relation to distribution of products. If they opt for funds of third party funds, they know we can help them with that and the same if they go for a multi-tie strategy or set up a fund supermarket,” says Mr Alcaraz, well aware that Abbey and its sister insurance companies recently outsourced all their asset management on a multi-manager basis.

“At the moment Abbey is developing its strategy for the next few months and as soon they decide what they want to do, Allfunds will be supporting them.”