Asset management: Crisis review

2008 was, after the LTCM crises, the second but probably most profound crisis for the asset management industry worldwide. Lehman’s collapse marked the beginning of a new age in the history of asset and liability management


By the middle of 2009, the asset management industry had evolved into a more consolidated and less complex industry. Savings rates around the world grew, obliging the industry to respond to this new demand.

The Portuguese case: industry analysis
In Portugal the case was similar, with highly diversified product ranges being sliced down to a more objective and less complex product line. Investors again looked at the asset management industry as a good alternative for their savings, as shown by the positive net sales totalling €2.3bn in 2009, of which nearly half was accomplished by Santander Asset Management.

By the end of 2009 the industry’s size totalled €17.2bn, with new funds launched representing €1.1bn, or 6.4 percent of the total value of mutual funds – accounting for 38.2 percent of that year’s growth.

Both guaranteed and special investment funds were the two growth pillars of the industry during 2009 and continued throughout 2010-11. By the end of 2009 guaranteed funds presented a total value of €2.7bn, a year on year increase of 22.7 percent.

With the 2008 crisis and the uncertainty over economic development throughout 2010 (concerns which are still valid in 2011), investors found in these funds a good opportunity to acquire exposure to the performance of assets of the most varied kind, whether securities or otherwise, while ensuring the preservation of the capital initially invested. As a result guaranteed funds now represent the second largest category in the domestic industry.

Another segment that became popular coming out of the crisis was the special investment funds category. By growing nearly 70 percent in 2009, this segment became the leader in terms of assets under management, with a total of €3bn and a share of 17.7 percent, followed by guaranteed funds with a share of 15.7 percent.

Pension fund management
Santander Asset Management (Santander AM) currently manages €2bn on pension fund schemes. The group’s investment policy for all pension fund schemes is convened by the UNEP Finance Initiative and the UN Global Compact, establishing a framework to help the pension’s beneficiaries achieve better long-term investment returns and sustainable markets through better analysis of environmental, social and governance issues in investment process and the exercise of responsible ownership practices.

The team defines its asset allocation policy identifying a broad mix of assets (equities, fixed income, cash equivalents and alternatives) and tested at all times in order to achieve the plan’s investment return and risk

At Santander AM, different methods of modelling are used for traded market risk versus non-traded risk whereby traded market risk is modeled and calculated using a Value at Risk methodology. Additionally stress-test models for market risk but also liability management are conducted by both the asset manager’s team and the internal risk control department.

Santander AM always refers to the latest Basel indications available and applicable to pension fund accounting.

Shaping the industry’s future
Santander AM launched over €200m in new products and led the industry’s share of new product launches during the past two years. Innovation is the one of the success elements of Santander AM – working closely to accommodate clients’ needs but also strongly representing the role of prudent fiduciaries, responsible for the financial health and security of its clients’ savings.

Trust and confidence are key elements of a client relationship that should be nourished using transparent and proactive communication. Strong client commitment is a long-term relationship that Santander AM promotes using five pillars:
– Commitment to a stable and professional team of portfolio managers
– Rigorous liquidity risk management with proactive exercise of stress testing
– Industry’s best practices of price settlement and portfolio transparency
– Proactive response to regulatory changes
– Constant review of potential conflicts of interest

By the end of the first half of 2010, Santander AM was the number two player in mutual funds in Portugal. In 2011 it will continue to develop new products at the same time as it guarantees the best expertise in the traditional domestic market funds. The company holds three Funds in Portugal ranked five stars by S&P/Morning Star – Santander Global, Eurofuturo Ciclico and EF Defensivo – and the most prized domestic Equity Fund – Santander Acções Portugal.

Santander Asset Management will also continue to ensure excellence in all funds under management with active and objective risk control management.

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