European fund sales reached €26 billion ($30 billion) in September 2005 - this is down 33 per cent from August’s figure but is the best Sept...

European fund sales reached €26 billion ($30 billion) in September 2005 - this is down 33 per cent from August’s figure but is the best September figure for five years, according to Feri Fund Market Information.

Equity funds recorded their best month since the stock markets crashed in 2000, with €14.8 billion. Equity funds displace fixed income funds as the best performing asset class for the first time in 13 months.

Total fund sales for the year-to-date were €263 billion. This exceeds the full year figures for each of the past four years. Feri predict that, in current market conditions, overall sales for 2005 will exceed €300 billion.

UBS is seeing a greater demand for higher-margin structured products among its wealthy clients, according to a report by Dow Jones Newswires.

The demand is happening at the same time the Zurich-based bank has been integrating its investment and private banking arms to tailor products for wealthy clients.

Many more former investment bankers now work in private banking teams at UBS, according to the report.

The cooperation is having a positive effect on revenue, according to Marco Schaller, who heads a 15-person product-development team, part of the private bank, in Switzerland, said the Dow Jones report.

UBS said the advantage of such integration is that the products can be made quickly and managed at no extra cost in-house. They are margin-rich and the take-up with other clients tends to be rapid, said the report.

"We have the pooling effect - if we can get various clients to go for it, we can realize economies of scale," Vittorio Schiro, head of structured equity products for the Swiss unit of UBS' investment bank told Dow Jones.

UBS’s experience is backed up by a new report by Greenwich Associates which states that institutional investors in Europe are increasingly participating in customized OTC and securitized equity derivative products.

These structured derivatives are then being sold on to high net-worth individuals and other retail customers, according to the Greenwich Associates’ 2005 study on European equity derivatives.

“In the US, our research reveals that investors are making greater use of highly liquid equity derivatives as a substitute for cash equities. While European institutions are also using so-called ‘flow’ derivatives in this manner, the greater emphasis is on structuring customized OTC/securitized/hybrid product trades for third-party distributors that pass these products on to the retail market, particularly across the Continent” said Greenwich Associates.

European institutional investors active in customized OTC, securitized and hybrid derivative products increased from around 70 per cent in 2004 to almost 85 per cent in 2005. The notional value of these instruments traded annually by the average European institution nearly doubled from $420 million to $820 million over the same period.

In the UK, the typical institution’s notional principal trading volume rose from about $350 million in 2004 to $880 million in 2005. In Switzerland it rose from $360 million to $870 million, according to the report.

More than 70 per cent of Continental Europe institutions that use OTC/securitized/hybrid equity derivatives sell these products off to retail investors. Eighty per cent of European banks investing in these equity derivatives do so, as have more than two-thirds of mutual fund users and more than 60 per cent of investment managers active in the products. But only 28 per cent of UK institutional users pass these products on to retail investors.

Many European institutions, particularly the banks, re-brand the structured equity products they buy and sell them under their own name. As much as 80 per cent of the OTC equity derivatives products sold in the UK and almost three-quarters of that sold on the Continent are re-branded.

Fund Launches
Argentinean-based Copernico Capital Partners have announced the listing of the Copernico Latin America Strategic Fund on the Irish Stock Exchange and is looking to attract European high net worth investors to the fund.

The fund provides investors with exposure to a broad range of Latin American financial instruments and uses hedging strategies to maximize returns and reduce the risk to principal or the volatility associated with the region. It employs an event-driven strategy, combined with some elements of momentum.

The fund which is open-ended and domiciled in Cayman offers investors two US dollar denominated share classes: Class B and Class C shares.

The class B shares have had an average annual return of 16.05 per cent with an annualized volatility of 3.78 per cent since inception in October 2003.

Funds under management are presently $193 million.

Northern Trust has linked up with Nordea to launch two manager-of-manager funds in Finland. They will be rolled out across the rest of Scandinavia in the near future, pending regulatory approval. They are initially aimed at the unit-linked market, including high net worth individuals and institutions.

Northern Trust will become the sub advisor, on a manager-of-managers basis, to two of Nordea’s best performing funds which will then be sold through Nordea’s life and pension distribution channel.

The funds, one global and one European, each have between two and four underlying sub managers and are aimed at outperforming a relevant benchmark in a risk controlled manner using manager diversification and style neutrality, according to Northern Trust.

Northern Trust’s London-based manager of manager international research team under Tony Earnshaw will lead the Research for the new funds with support from Northern Trust’s global research team located in the US, Canada and London.

An offshore feeder umbrella range has been launched by JO Hambro Capital Management that opens its UK onshore funds to more investors in the Channel Islands and mainland Europe.

The first fund to be used in the umbrella is the JOHCM UK Equity Income Fund, domiciled in Guernsey. This fund now has around £149 million ($256 million) under management and is designed to deliver long-term growth and generate above-average dividends.

The fund invests in an actively managed portfolio of 50-70 stocks and is benchmarked against he FTSE All-Share index. The fund will soft close when it reaches £750 million according to JO Hambro.

“This is the first feeder fund we have launched. The Channel Islands and Continental Europe are important markets for JO Hambro,” said Nicola Pease, chief executive.

“Around 50 per cent of our investments came from overseas last year, and we are considering adding the American Growth Fund to the offshore umbrella,” she said.

UK-based the Kyte Group, along with Talisman Global Asset Management, have launched a new fund management business with a mandate to identify traders and trading strategies with the potential to outperform industry benchmarks.

KTH Fund Management will provide the investment capital to allow these traders to develop marketable hedge fund businesses.

“There are many fund managers in the market with great potential; our job is to find the most skilled and to help them develop their own businesses,” said Dr Rami Habib, managing partner of KTH.

“Many of the top performing hedge funds now have limited additional capacity and are closed to new investors. KTH has been established to develop the next generation of star performers” said David Kyte, director of Kyte Group.

Kyte Group is an independent clearer, broker and trader of derivatives, which was established by David Kyte in 1985.

Talisman Global Asset Management was established in 1990 to invest internationally in equity and venture capital markets. It manages over £400 million ($689.2 million) in investor funds.

Heritage Bank & Trust, a Geneva-based private bank, has launched a number of funds through its recently acquired asset manager, Global Fund Management, according to a report in Le Temps.

Global Fund Management has been re-branded Heritage Fund Management and has since launched three funds for high net worth investors.

Heritage was originally set up in 1986 to manage the fortune of the Esteve family, who made their fortune in the Spanish stockbroker business. The firm obtained a banking license in December 2003.

It is still controlled by the Esteve family, who control around 78 per cent of the bank, but the family’s fortune comprises only a small amount of the SFr3 billion ($2.2 billion) of assets under management, according to Jacques Mechelany, assistant general manager of the bank, who was quoted in Le Temps.

New Star is responding to demand from European investors for high alpha funds by launching the New Star Pan-European Equity Fund, a sub-fund of New Star Global Investment Funds Plc, which are based in Dublin. The fund launch period will be 28 November 2005 to 9 December 2005.

The fund will aim to generate alpha through active stock selection, with a strong long-term absolute returns capital growth policy through a single diversified portfolio of UK and Continental European equities and equity-related securities.

The fund will be managed by Richard Pease, Stephen Whittaker and Daniel White. Mr White will determine the weighting between Continental Europe and the UK and will act jointly with Mr Pease in individual stock selection within Europe excluding the UK. Mr Whittaker will be responsible for UK equity selection.

The split will be 65 per cent Continental Europe and 35 per cent UK and the fund will typically hold between 70 to 100 stocks. The fund will be denominated in Euros and will invest primarily in mid and large caps companies.

Its benchmark will be the FTSE World Europe and the minimum investment will be €5,000 ($5,880) for retail customers and €10 million for institutions. Charges for retail customers will be 1.75 per cent with an initial 5.25 per cent fee.

Credit Suisse has launched a novel investment concept for investors in Switzerland: the charity note.

The Charity Bonus Note, an alternative to investing in bonds, offers 100 per cent capital protection. It is a structured derivative and is based on a global portfolio of 20 underlying equities. Even if the overall performance of the portfolio is negative, the investor receives repayment of at least 100 per cent at maturity.

The minimum investment is SFr 1,000 ($757) and the term is six years. The notes can be traded on the secondary market.

The Charity Yield Note offers conditional capital protection, with investors receiving regular, fixed interest payments. It is based on four equity indices: DJ EURO STOXX 50SM Index, S&P 500 Index, Nikkei 225 Index und SMI. Investors receive an annual coupon of indicative 5.5 per cent.

If one of the indices touches or falls below the predetermined barrier during the term, the repayment of the nominal amount may be reduced. Again, the minimum investment is SFr1,000 and the term is six years.

Both notes enable investors to achieve a return and contribute to the fight against youth unemployment as 1 to 1.5 per cent of the nominal value is donated to selected projects each year through the Symphasis Foundation which was established in 2002 by Credit Suisse.

Atlantis Investment Management has launched two UCITS III Dublin-based funds that invest in Indian and Korean stocks targeting high net worth investors as well as institutions.

The funds form part of the Atlantis International Umbrella Fund and the minimum subscription for both is $10,000. They will be listed on the Irish Stock Exchange and distributed in Germany and the Netherlands as wells as Ireland and the UK.

The India fund has an annual management fee of 1.75 per cent and will invest in 30-35 undervalued growth companies. It aims to raise $350 million.

The Korean fund has a management fee of 1.5 per cent and will target 30-50 companies listed in Korea. Its objective is to raise $250 million.

UK-based private bank Brown Shipley has launched an investment scheme with favourable tax features for high net worth investors based upon the UK’s smaller cap market, AIM.

The Brown Shipley AIM Portfolio Service offers the growth potential often afforded by companies on AIM, and after two years will be 100 per cent free from Inheritance Tax with the effective Capital Gains Tax rate reduced to only 10 per cent. The minimum investment is £100,000 ($173,000).

Investing in AIM can be highly tax-efficient and it is this combination of performance potential with tax breaks that Brown Shipley believes makes the AIM market attractive for some HNW investors, although not all AIM companies qualify for tax reliefs. These include accelerated taper relief whereby the CGT rate payable reduces to 10 per cent. Most shares are subject to a reduction to 24 per cent over a 10 year period.

The portfolio will have approximately 10 stocks across a variety of business sectors in an attempt at minimising risk whilst at the same time maximising growth potential.

Mumbai-based Cholamandalam Securities has launched a new portfolio management service called Sigma, which plans to target India’s high net worth market.

The new venture plans to leverage its links with Cholamandalam and provide clients with expertise in equity research and trading, according to a statement from the stockbroker.

"It is imperative to expand our services to suit the needs of various segments to remain competitive in the financial services market. Sigma will reflect our capabilities in rigorous research, disciplined asset allocation and prompt customer service in capital markets," said Cholamandalam’s chairman M A Alagappan in a statement.

CCB Principal Asset Management, a fund management joint venture between Principal Financial Group, China Construction Bank and China Huadian Group, is to launch its first open-ended fund, according to reports in the Chinese press.

The report said that between 65-95 per cent of the fund will be invested in the stock market.

CCB, one of China's largest banks which recently listed on the Hong Kong stock exchange, holds a controlling 65 per cent stake in the venture, while Principal Financial holds 25 per cent and Huadian 10 per cent.