Enter the specialists into banking arena

The delegation by banks and fund managers of specialist asset classes to specialist external advisers continues apace. For this issue of PWM we can report at least three major new deals. Arca of Milan, one of Italy’s leading retail savings institutions, has contracted out the management of a new suite of absolute return products to the Russell Investment Group. This is an extension of an existing product development partnership between the two groups. Deutsche Asset Management has been selected to act as sub-advisor for Columbia Management, the internal funds house at Bank Of America, to run funds investing in collateralised loan obligations. Both partners in this agreement are keen to stress that the arrangement is aligned with the strategic objectives of the two groups. The third arrangement, involving French distributor and banking chain Natexis Banques Populaires, in many ways mirrors this type of deal. It shows the partnership model is a successful and increasingly popular one, especially in the retail world. But it is particularly interesting because it shows a major change in beliefs. It shows that a banking group which has previously denounced the very idea of partnerships, always stating that its role was to choose the best funds at a particular instant, to hire and fire where necessary and to avoid marriages of convenience at any cost, has come round to the new way of thinking. Natexis Asset Management, the ?100bn funds house which has the specific task of creating products for its parent regional banking group, has decided to sub-contract the US portions of its global equity products to two North American managers, Delaware Investment Advisers and Metropolitan West Capital Management. Initially they have been allocated $200m (?170m) each. The French group has taken this step because it believes it has no real expertise in managing US equities. While this is part of an existing plan to capitalise on open architecture, and sub-contract increasing amounts of products, these are not pure fund selection plays. These appear to be deeper agreements, where Natexis has looked for American groups, which fit in with its own culture, business model and way of managing assets. The search for the fit was so important that the group’s CEO Daniel Roy was despatched to personally conduct much of the due diligence at the two US houses. The group is also believed to be searching for a long-term partner in the UK, a partner that will have a real say in how business is developed, rather than just managing or distributing funds by following orders. This change in strategic thinking from such a pioneering group in the sub-advisory space is not to be underestimated. Those asset managers, including Goldman Sachs, who have long pressed for deeper, more lucrative partnerships, in addition to white labelling and pure distribution, will be watching intently.