Yields and Protection: how to follow customers’ needs

Financial markets went through a particularly difficult year in 2022, while Fineco Asset Management achieved a double-digit growth, to count now over 29 billion euro of AUM.

Fabio Melisso, CEO of the firm, explains the key factors for this success with three elements: proximity to the sales network, time-to-market and value-for-money

Ireland has been a worldwide attractive environment for asset managers for several decades, mainly due to its favourable regulatory environment and a stable reputation in the industry. Over the last few years this has attracted a further skilled workforce in this sector, making the country a preferred hub for many global leaders, who have opened their headquarters there.

This is the case of Fineco Asset Management (FAM), a relatively new player who opened in 2018 and has since shown to be fast paced in growing to more than 29 billion euro of AUM in 2023, and 198 products launched since its start.

Nowhere to hide: 2022, a particularly tough year

2022 was an annus horribilis for financial markets, with no way to hide for either equity or fixed income. What was particularly significant in this context was the high number of penalising events that followed each other within the space of a few months.

As global markets began to price-in the improved sentiment since the end of the covid-pandemic, slowdowns began in global supply chains. These were later exacerbated by the rapid escalation of the conflict in Ukraine, leading to a full-blown energy crisis.

Inflation, already skyrocketing, continued to rise despite attempts by central banks to stabilise investors’ sentiment. Particularly hawkish policies on rising interest rates applied by the European Central Bank and the Federal Reserve led to a collapse in bonds, with prices reaching levels unforeseen before.

Where many asset managers struggled, FAM showed to be particularly resilient to the changing market environment, taking the opportunity to launch new compelling products within both the equity and fixed income space, and collecting a double digit growth.

FAM results: a story of success regardless headwinds

FAM’s net profit has grown by +41% between 2021 and 2022. This was mainly driven by a unique blend of increase in collection and a maximisation of capabilities: “we share our DNA with Fineco Bank” says Fabio Melisso, Company CEO, “and we have based our growth in terms of investors and AUM on the pursuit of efficiency to pass on the benefits to our clients”.

The total collection figure for Fineco in 2022 stands at around 4.5 billion euro between retail and institutional clients, thanks to a significant commitment on various fronts.

The product offering has been sensitively renovated with new launches, specifically made to meet clients’ needs in difficult market conditions. Attention to cost management and efficiency remained another key point of strength.

Those are just some of the reasons why this path of growth continued in the first semester of 2023, with January being FAM’s best month ever for net sales.

The three pillars of FAM’s success

“Competition is part of ourselves, as Asset Managers and Professionals: standing out is our main objective. In fact, although we are part of the Fineco Group, we operate within an open platform, where our funds are just one part of an extensive offer. This includes many investment firms put at the disposal of our clients and financial advisors” explains Mr Melisso.

To keep collecting results in a fully competitive environment, FAM developed a strategic and operative plan based on three focal points: proximity to the sales network, time-to-market and value-for-money.

• With proximity to the network, FAM refers to the great focus on listening to clients and financial advisors’ needs, in a process of constant engagement and partnership.
• Time-to-market is a point of distinction for FAM, in their commitment to release the most suitable products for the market context in the shortest possible turnaround.
• Value-for-money is the key enabler of this strategy, allowing FAM to widen their offer with competitive and balanced prices.

This approach has been quite successful so far, with 444 ISINs launched in less than five years.

A constantly increasing offer via structured products

In a particularly uncertain market period, FAM has always maintained its ambition of understanding its customers’ needs, working quickly in collaboration with the sales network.

In a context of rising interest rates and finally attractive bond yields, FAM has been farsighted enough to answer to investor’s need for stability improving tools that markets were already offering.

In October 2022, Fineco launched the Global Defence Products family aiming to offer capital protection at maturity.

This family of new products was designed as a maturity product. It benefits from the general environment of bond rising interest rates and offers a relevant coupon over a time horizon of 3 – 6 years. The Smart Defence portfolio invests in a blend of government bonds and other segments of fixed income. It also offers exposure to equities via option, allowing the client to participate in the sole positive performance of the equity part of the portfolio.

FAM’s ETFs: another winning bet for collection

When asked what FAM’s plan is to continue in its growth, Mr Melisso answers “continuing to do what we do best: offering quality products with attention to margins, meeting our end-customers’ needs”.

Last October, they expanded their offer with the launch of 11 ETFs: 6 in equities by sector- and thematic-tilted indexes and 5 in fixed income.

This launch was a further proof of FAM’s ability to challenge still unexplored market opportunities. The result: FAM becoming an ally for those clients who wanted to diversify their portfolios, following innovative trends with moderate costs.

“At FAM, we are firmly convinced that even in these market conditions investing in equities favours a more blended balance for investors’ portfolios. This should be done through global exposure, investing in structural trends such as sustainability, clean energy, disruptive technologies and innovation” explains the company’s CEO.

“Because of this, we are already working to further expand this offer, maintaining our unique attention to margins control, leanness and efficiency in delivering high quality investment products always compelling with the market panorama.”

A challenging future with new spaces for innovating

The new interest rates landscape is less transitory than many would have believed.

Almost all the players agree that a trend that is likely to continue in 2023 is the recovery of bond markets. Current yields are around 4% – unthinkable a few years ago – and guaranteeing attractive returns for investors, specifically those ones with a relatively conservative risk / reward profile

“Those asset managers who have a huge exposure to equity – also in terms of customer base – are likely to face greater challenges” explains Mr Melisso.

“In Italy, in particular, those who apply performance fees will have an even harder time. But this is part of the game and represents a healthy process that spurs healthy competition. We confirm our objective to expand further our offer with solutions that can be complementary to the traditional asset management, without replacing it, always maintaining our focus on margins controls and convenience for the client.”