Market Research

Sub-Advisory Funds Continue To Grow – Mediolanum

Amanda Cheesley Deputy Editor 12 October 2023

Sub-Advisory Funds Continue To Grow – Mediolanum

Mediolanum International Funds (MIFL) has released an AllFunds Data Analytics 2023 report entitled “Bringing boutique talent closer to investors through delegated fund managers,” which looks at fund industry trends across both fund-of-fund structures and sub-advisory fund agreements. 

A new report by Allfunds Data Analytics highlights the growth of sub-advised funds in the funds industry, which have reached €1.38 trillion ($1.46 trillion) in assets delegated to third-party managers and 11 per cent of the UCITS funds universe.

According to the report, interest in boutiques has grown, with mandates in June 2023 rising by 2.5 per cent to 44.4 per cent, marking a 16.7 per cent increase in the last three years in sub-advised mandates. This has been mainly driven by the multimanager approach where boutiques’ mandates grew 26.8 per cent overall in the last three years.

A sub-advised fund is an investment fund which is managed by another management team or firm other than where the assets are held.

The report shows that ESG funds are driving growth, representing a 45 per cent increase in EMEA sub-advised mandates. While the total sub-advisory ESG market grew by 12 per cent, Mediolanum International Funds (MIFL) said it experienced a 94 per cent increase in ESG mandates, making it the industry’s highest growth among the funds' platforms belonging to banking groups, both on a one-year and three-year basis. 

The notable weight of ESG-related mandates is being fuelled by a combination of fund launches under the new articles 8 and 9 of the EU’s Sustainable Finance Disclosure Reguation as well as existing/new mandates being put out to tender following changes in the funds’ investment approaches.

The report was released on MIFL’s 25th anniversary at the recent MedMe event in Dublin, in the presence of Jennifer Carroll MacNeill, the Irish minister of state at the department of finance,

MIFL said it held its leading position across EMEA for sub advisory mandates within the Banking Distribution Channel; it has grown its assets by 9 per cent in the last year to reach €46 billion assets under management in the first half of 2023. 

The report, entitled Bringing boutique talent closer to investors through delegated fund managers, investigates key trends in the delegated fund industry across fund-of-fund structures and sub-advisory fund agreements. It found that the growth of sub-advised fund assets over the last year was driven by multimanager mandates, which represent 68 per cent of MIFL’s total AuM. 

Amongst delegated mutual funds, sub-advised funds are typically preferred over fund of funds for accessing active managers, the report adds. This is mostly because of the lower regulatory restrictions and higher commercial leverage that the sub-advised fund model can offer (the average mandate size is €351 million while the average fund-in-fund allocation to third-party funds is €79 million).

Mediolanum said it has more exposure to sub-advised funds (71 per cent of its delegated fund assets) than it has to fund-in-funds (29 per cent).

Furio Pietribiasi, CEO of MIFL, said: “Pioneering the sub-advisory model has really made the difference for our clients and distributors,  allowing for unique product innovation adapted to ongoing financial markets' conditions and capturing the best long-term opportunities for the investors."

“Today, supported by Ireland’s thriving financial ecosystem, which we are proud to be an integral part of, we have 113 sub-advisory mandates, of which 45 are with boutique managers, which accounts for €12.1 billion, corresponding to 26.3 per cent of our total AuM,”  Pietribiasi continued.

“We have always believed in the benefits of the multimanager approach, which allows investors to access open architecture at a more competitive price where the manager selection and allocation are decided by long-standing investment professionals; distributors have full transparency and control of their clients investments at any time, resulting also in a longer clients’ investment holding period thanks to the constant product evolution which adapts to market trends or investment opportunities.”

“As highlighted in this report, the continued growth in the funds’ industry, despite market volatility, is a testament to the benefits of sub-advisory and multimanager,” Pietribiasi added.

MIFL is a management company approved by the Central Bank of Ireland to manage UCITS or undertakings for the collective investment in transferable securities, which are investment funds regulated at EU level, and Non UCITS funds.  

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