trending Market Intelligence /marketintelligence/en/news-insights/trending/JBET_cqF5dyokPU-0Ql4dw2 content esgSubNav
In This List

3rd-party distribution pays off for Nordea Asset Management

Blog

Latin American and Caribbean Market Considerations Blog Series: Focus on LGD

BLOG

Banking Essentials Newsletter: June Edition

Case Study

กรณีศึกษา A Bank Takes its Project Finance Assessments to a New Level

Blog

Financial Institutions Factor Transition Risk into Climate-Related Stress Testing


3rd-party distribution pays off for Nordea Asset Management

While other European asset managers have seen persistent outflows, Nordea Asset Management has seen robust inflows, buoyed by its third-party fund distribution network and increasing wealth in the Nordic region.

The Stockholm-based firm saw the second-largest inflows in Europe in 2016, with assets under management increasing by 15%, according to Morningstar. By contrast, 15 straight quarters of outflows at the U.K.'s Aberdeen Asset Management Plc and declines at Standard Life Plc's flagship fund spurred a merger between the two.

Nordea Asset Management, the fund arm of Sweden's largest bank Nordea Bank AB (publ), benefits from its third-party model whereby banks and wealth managers around Europe distribute Nordea's Luxembourg-registered open-ended funds to clients or include them in fund of fund solutions. It is predominantly an active manager.

Its high net inflows in 2016 were about 80% related to third-party fund distribution, its CEO, Nils Bolmstrand, told S&P Global Market Intelligence in an interview. He said the Nordea 1 Stable Return Fund was the best-selling fund in Europe in 2016 and one of the largest in Europe.

Last year's sales were predominantly outside the Nordic countries, and Nordea Asset Management's client base, by share of AUM, is now 30% non-Nordic, according to Anders Klinkby, CEO of the Danish Investment Fund Association in Copenhagen. The proportion of non-Nordic clients is much smaller for the other large Nordic managers, although for some of the smaller boutique managers in the Danish capital, non-Nordic business is significant, he said in an interview.

"This very strong Luxembourg-based operation is part of the explanation for Nordea's success — the other is that they had some products that hit the current demand of the market perfectly," he said. "No other Nordic asset manager comes close in terms of either fund range or international sales and support operation."

An early focus on developing third-party platforms together with a strong local sales force in Europe, Asia and South America also played a crucial part in Nordea's success, Sandro Näf, CEO of Copenhagen-based Capital Four Management, said in an interview.

Klinkby noted that Nordea's 15% AUM growth in 2016 came on the back of a 9% increase in 2015. Going into 2017, total AUM stood at €217 billion. If anything, its current challenges stem from the popularity of its actively managed products.

In a Jan. 26 earnings call, Nordea Bank's COO Torsten Hagen Jorgensen said the manager should see "a few quarters with somewhat lower net inflow," followed by a return to "a more normalized level" of 4% to 5%. This is due in the main to Nordea's decision to "soft-close" its quick-selling Stable Return Fund to new investors Sept. 7, 2016 — a move aimed at protecting the investment process of fund managers amid fast-rising AUM.

It had taken a similar decision in March when Nordea's Stable Long/Short Equity fund exceeded €1 billion.

Soft-closing the most popular funds for an undetermined period of time will hit fee growth, so expanding capacity is a key priority for the manager. Bolmstrand told Bloomberg News in March that he aims to expand his staff of 660 by 50 to 100 new employees in 2017, on the back of 60 new hires in 2016.

Northern lights in asset management

Nordea Asset Management is the largest manager in the Nordic countries, with a market share of about 16%, says Bolmstrand, who headed Nordea's life and pensions subsidiary before taking over at the helm of the fund unit Jan. 1. Its previous head, Christian Hyldahl, left in October 2016 to become CEO of the large Danish pensions firm ATP.

The unit's success has parallels in other Scandinavian asset managers, albeit on a smaller scale.

"You do see a number of success stories among Nordic asset managers," Klinkby said. Denmark has seen the development of a number of highly specialized boutiques in recent years, he said, naming Maj Invest, Capital Four and C Worldwide as examples.

Klinkby said these managers did not specialize in any particular Danish asset classes but used the Danish industry cluster of well-functioning banks and pension providers as a platform to manage "different international asset classes for an increasingly global customer base."

Strong Scandinavian inflows contrast with patterns elsewhere across Europe. According to data from the European Fund and Asset Management Association, flows into European UCITS funds halved in 2016, to €275 billion from €590 billion in 2015, with outflows of €7 billion in the first quarter. Multiasset fund inflows dropped from €240 billion in 2015 to €48 billion in 2016, as investors shied away from stock markets.

Average wealth levels have grown rapidly in Denmark, Norway and Sweden over the past 15 years, helping to feed the growth of the region's asset management firms. Sweden's wealth per adult has increased from $73,046 in 2000 to $227,295 in 2016, ninth in the world — ahead of Germany and the Netherlands, and only slightly behind Japan — according to Credit Suisse's November 2016 Global Wealth Databook.

Cumulative returns in equity markets, Näf said, rose an average of 24% from 2000 across Europe, but were up by 138% in Sweden, 274% in Norway and 292% in Denmark. This, he said, is explained by widespread property ownership combined with strongly increasing house prices, and well-performing IT, pharmaceuticals and oil sectors.