Managers operating in Europe expect to gather assets flowing into environmental, social and governance as well as illiquid and dividend strategies in 2021, but sources expect margins are going to remain under pressure.
Despite the emergence of a new strain of the coronavirus, which could delay the return of pre-COVID-19 economic conditions, sources still expect the deployment of vaccines could bring relief as early as the second half of the year. And when the majority of the high-risk population is vaccinated, allowing cities to open up further, managers are confident that a restarted economy will increase the pace of their AUM growth.
The vaccine announcements are "probably the game changer that markets have been waiting for," said Sonja Laud, CIO of Legal and General Investment Management Ltd. in London. While distributing the vaccine could be challenging, delivering it to the high-risk population by the end of the second quarter is achievable, she said.
On this anticipation, money managers in Europe are developing strategies that can help investors thrive in the early phase of the recovery, while at the same time help them navigate the effects of the pandemic.
For example, they are preparing new dividend and credit strategies that have been unaffected by the asset purchase programs of central banks.
But managers said they also expect European investors' focus will largely be on buying strategies compliant with parts of the Sustainable Finance Disclosure Regulation that becomes effective in March.
"We are hearing very loudly from asset owners that a significant proportion of assets next year will be deployed to Article 8 and Article 9 (of SFDR rules) funds, in other words those that promote environmental and social factors and those that are seeking sustainability impact," said Mike Zelouf, managing director Europe, Middle East and Africa at Western Asset Management Co. Ltd. in London. "We are weighing up launching a new sustainable global corporate fund, although we are aware that many investors prefer to invest in funds with a track record," he said, adding that investors want existing funds to meet disclosure criteria on environmental and social factors embedded in Article 8.
Western Asset had $479.8 billion in assets under management as of Sept. 30.