Pioneer predicts shrinking micro-assets demand

Pioneer Investments completed the restructuring of its Luxembourg cross-border product range in 2005 in anticipation of two expected trends for the coming year: firstly the rationalisation of distributors’ own product ranges, and secondly the accelerating interest in

provision of absolute return strategies.

“We see, on one hand, a keen interest for those products, relying on the manager to generate added value and, on the other hand, a decreasing interest in some micro-asset classes,” says Sandro Pierri, head of commercial operations for Southern Europe at the ?158bn asset management company of Gruppo UniCredito Italiano.

Those micro-asset classes are the once-booming country or sector funds, which “are all closing

now as they have not been able to gather sufficient assets.”

To meet increasing market demand for absolute performance, Pioneer launched two new total return products early in 2005, as allowed by Ucits III legislation. The total return defensive and total return dynamic funds are targeting returns of euribor (Euro interbank cash offer rate) plus 50 basis points and euribor plus 150 basis points, respectively.

“We have also merged sector funds with regional or global equity funds, keeping just the one in telecoms and technology, for which there is still some demand out there,” says Mr Pierri. “In 2006, therefore, the interventions will be essentially of maintenance and fine tuning, rather than real innovation.”

However, there is increased activity in the bank’s Italian GPF (gestioni patrimoniali in fondi) products. During 2005, Pioneer sold ?12bn of these fund of funds-style private banking vehicles in Italy, an amount Mr Pierri calls “stratospheric”.

He claims the sales were due to Pioneer’s ability to meet the demand of its distribution channels, increasingly moving towards advisory-based products, and away from traditional “sales push” logic.

“Selling a GPF to a client is just the final act of an advisory process,” explains Mr Pierri, who plans to sell these products only to the wealthier end of the client spectrum, where the labour intensive advisory process really begins to pay off.

“GPFs are asset allocation products, which analyse and take into consideration the client’s risk-return

profile.”

He expects total return products, on the other

hand, to do well amongst customers of retail banking outlets.

ET

Pierri: fine tuning and maintainance in 2006