New fund launches plunge to 2001 low on Covid rut

Asset managers are stuck in a rut when it comes to new fund launches, with the second quarter of the year failing to jolt product development teams into action.

Data from Broadridge shows asset managers launched a total of 905 new funds between January and June — the lowest first half of the year since data started to be collected in 2001.

Between April and June, asset managers launched 475 new funds, marking a slight increase on the 430 rolled out during the previous three month period.

Mauro Baratta, vice president for distribution insight at Broadridge, said despite a “negligible uptick” in new launches during the second quarter, Covid-19 is still causing asset managers to keep a firm lid on new funds.

“Asset managers, like investors, have also taken quite a conservative stance and have adopted a ‘wait-and-see’ approach to product development and launches,” said Baratta.

“We are also experiencing fundamental changes in the way we live, work, invest, relate to other people and assuming that once a vaccine is found everything will get back to pre-Covid is naïve.

“Asset managers also have to take this into account — the new funds they were planning to launch may not be the right products in a post-Covid world.”

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Pascal Duval, head of retail solutions at Amundi, said one of the main reasons behind the big drop in new fund launches is linked to other priorities asset managers have faced in the wake of the pandemic, including managing significant IT and operational changes.

“The immediate imperative for all asset managers, and definitely with Amundi, has been to ensure that we were able to assure our fiduciary and regulatory duties,” said Duval.

“We also made an immediate imperative to preserve our legal, risk and compliance teams from extra new activities, until we got assurance that they had enough availability to start working on new products.”

Duval added that investor demand during the pandemic has been focused on “what was going on”, rather than new funds.

André Schnurrenberger, managing director for Europe at Cerulli Associates, said outflows from European funds since the pandemic hit in March has caused uncertainty for future launches.

Fundraising has also been made more difficult in the past few months, as has launching new products while product development teams work from home, he added.

“Asset managers froze many imminent fund launches and possibly put on hold further plans for product innovation and development for the time being, just as a precautionary measure and to initially further assess developments,” said Schnurrenberger.

“It now will be interesting to see how this evolves after the world having been in this situation for a prolonged period of time. The disconnection between financial markets and the real economy obviously contributes to the current uncertainty and might play a role as well.”

A reluctance among asset managers to push out new products is in contrast to the hedge fund industry, which posted a rise in the number of new funds launched during the second quarter.

Data released by HFR on 30 September show new hedge fund launches during the second quarter reached a one-year-high. The 129 new launches between April and June helped the hedge fund sector re-emerge from a lull, which saw the lowest number of new products pushed out since the 2008 financial crisis.

To contact the author of this story with feedback or news, email David Ricketts

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