The Future of Multimanager: The Changing Roles of Distributors and Assemblers

1
The Future of Multimanager The Changing Roles
of Distributors and Assemblers

• Cerulli Associates

19 September 2006 London
2
The Future of Multimanager
Agenda

• Defining the marketplace and characteristics
• Growth catalysts for multimanagement worldwide
• Distribution dynamics ripe for multimanagement
• Multimanagers next stage of development

3
Definitions Characteristics
4
Definition Characteristics
Multimanager product categories
Source Cerulli Associates
5
Growth Catalysts
6
Growth Catalysts Global Context
Advice delivery demands create pressure on
intermediaries

• Pressure on bank/broker intermediaries
• Supporting advice delivery and ensuring
  compliance through large salesforce
• Opening architecture without losing control
• Ensuring quality advice through salaried, less
  sophisticated agents

Canada
U.S.
U.K.
BANK/BROKER
IFA
Asia
Continental Europe
Latin America
Australia

• Pressure on independent intermediaries
• Smaller, more expert practices need scale for
  buying power, technology
• Need to handle multiple types of product
  packaging from various vendors
• Ensuring quality advice through fee-based pricing
  over entire portfolio

Source Cerulli Associates
7
Growth Catalysts
Current growth catalysts

• Push catalysts strategic and cost imperatives
• Adoption of open architecture on vendors terms
• Help promote proprietary product
• Fill gaps in expertise
• Simplify advice sales ? minimize training costs
• Highly profitable if built correctly
• Pull catalysts end-user appeal
• Provide embedded advice
• Offer diversification risk reduction
• Access to different menu of asset managers
• Tax efficiencies

8
Evolution of Multimanagement Trends
Multimanagers expanding past their traditional
client bases
Instl manager of managers
Retail manager of managers
FOFs
RETAIL
INSTITUTIONAL
Retail bank branch
Mass affluent
Wealthy individuals
Core platform offers and managed accounts
Large corporate pension
Participant-directed DC pensions
Small-plan pension liabilities
Smaller professional packagers (structured and
unit-linked)
Larger professional packagers
Source Cerulli Associates
9
Evolution of Multimanager Trends
Multimanagement has become a US1.2 trillion
market segment
Global Multimanager AUM (USbn)

• Multimanager assets represent segment with strong
  focused asset growth
• CAGR for past five years 17
• CAGR for all mutual funds 5
• CAGR for professional assets 3
• Future growth projected at 15 CAGR
• Faster than remainder of industry
• Multimanager 10 of non-US retail assets
• FOF funds of fundsMOM managers of
  managersExcludes funds of hedge funds

23YOY
20 YOY
Sources Cerulli Associates, multiple sources for
FOF data
10
Evolution of Multimanager Trends
Lifecycle over 20 of Equity fund net inflows
U.S. Lifecycle Mutual Funds (US billions)
Sources Strategic Insight, Cerulli Associates
11
Evolution of Multimanager Trends
Retail Multimanager Products as of Long-Term
Net New Fund Business
Source Cerulli Associates, Europerformance,
industry associations
12
Global Distribution Trends Ripe for Transformation
13
Global Distribution Trends Ripe for Transformation
Source Cerulli Associates
14
Global Distribution Trends Ripe for Transformation
Less time for advisors to handle investment duties
Average U.S. advisors time allocation
Source Cerulli Associates
15
Global Distribution Trends Ripe for Transformation
Catalysts complicating vertical integration in
fund management
Vertical Integration
16
Global Distribution Trends Ripe for Transformation
Multimanagers Manufacturers, assemblers, and
distributors
Source Cerulli Associates
17
The Future of Multimanager
Multimanagers next stage of development

• Multimanager gaining more appeal globally
  (regulations, pensions)
• Multimanagement plays into embedded advice
  trends
• More convergence between FOHF and long-only
  strategies for performance
• Multimanagers structuring better distribution
  strategies/ messages
• Untapped regions, such as the Middle East could
  spur new growth

18
For Further Information
Thomas S. Marsh Director tmarsh_at_cerulli.com
Ben Poor Senior Analyst bpoor_at_cerulli.com One
Exeter Plaza 699 Boylston Street, 11F Boston MA
02116 www.cerulli.com