Money managers are intensifying the search for defined contribution assets in Europe by focusing on retail distribution channels, as consolidation of institutional DC plans takes a toll on other parts of their fund management business.
And DC money managers said they are finding more sources of retirement assets by partnering with distributors such as insurance companies and retail banks. These partnerships help managers to avoid burdensome administrative processes associated with setting up country-specific arrangements, sources said, and facilitate communication in participants' local languages.
Some managers have set up cross-border plans, which can operate out of one, more business-friendly country such as Belgium and accumulate assets in country-specific compartments for other, more burdensome markets. But the success of the earlier effort to gather new assets has been slow.
Instead, in a consolidating DC market, managers see retail distributors as a way to capture the emerging retirement assets from savers opting for self-select options, expatriates and higher earners.
"People have become more comfortable with technology. Because of the digital intervention people are more prepared to interact and transact. And they want to participate in that trend," said Brian Henderson, partner, director of DC consulting at Mercer LLC in Edinburgh.
Cerulli Associates estimates €3.4 billion ($3.9 billion) worth of self-managed, individually directed assets will be saved into DC arrangements by 2022, growing 41% from €2.4 billion in 2018. These assets across Europe also will grow at a faster pace annually — 8.7% by 2021 compared to the 7.8% annual growth recorded between 2011 and 2016, according to the analytics and consulting firm.
"In Europe, we are focusing on intermediaries, wholesale distribution big banks and networks where we have good feedback on our products," said Thomas Merz, head of European distribution, ex-U.K., at Vanguard Group in Zurich. The "self-selectors," wealth managers and sometimes insurance companies are the key sources of savers for the business, he added.
But Mr. Merz thinks savings opportunities need to be accessed market by market rather than through cross-border initiatives. "We are not there yet; we are far from it. It will take a couple of years," Mr. Merz said of cross-border efforts such as pan-European personal plans.
Adam Laird, head of exchange-traded funds strategy, Northern Europe at Lyxor Asset Management in London, said defined contribution has "always been a tricky market to get into. But the consolidation in Europe made it harder to get to the larger institutional DC plans."
"Self-select investments (through) independent financial advisers have become a real opportunity. I think for a very long time, there was an expectation (about) the one-size-fits-all model. But we are seeing that individualization is required," Mr. Laird said.
Lyxor's DC business is 15% to 20% of its total business and is growing, Mr. Laird said. Lyxor accesses defined contribution assets through private banks.
Other managers, including BlackRock Inc. and Principal Global Investors, have tied up with local firms to sell target-date funds.
In Sweden, BlackRock distributes its target-date funds via Lansforsakringar Bank AB. Mikael Bolander, analyst-manager selection at Lansforsakringar Fondforvaltning, the fund management side of the bank in Stockholm, said there are a few regulatory barriers for managers to overcome in order to enter the Nordic market on their own.
"It's much easier for the manager to establish oneself (through a partnership)," Mr. Bolander said.
