The stage is set for fierce competition over passive funds
The competition to attract Danish investors and savers with attractive passive index funds with relatively low costs is coming to a head.
Danske Bank and Nordea have announced that they have new measures in the pipeline, but a number of mutual funds are also getting ready to play their hand.
This can be seen in a poll carried out by FWAM among investment funds.
Danske Bank's new investment platform June, based on ETF funds, is expected to become operational this year. Nordea launched the trade platform Nordea Investor in 2015, which enabled trading with securities via smartphone, tablet or PC. Saxo Privatbank also offers passively managed investment from its trading platform.
FWAM asked a number of investment funds two questions about the funds and their reactions to the new measures from the two major banks. These are their answers:
Jacques Skovgaard, Head of Financial Markets, Alm. Brand:
What are you going to do to counter June and possibly a new investment world from Nordea?
"As early as last fall, we launched Alm. Brand's new investment product (IndexPlus), which is based on ETFs. However, this is targeted to investors with a minimum of DKK 2 million (approx. USD 290,000) in pension funds or available capital, so it's not a product that can compete with June."
What is your new strategy regarding ETF – and the clear tendency to invest more and more through those means?
"Our new investment product is under active management in the strategic and tactical allocation and as such passive in the operational area. When costs are low, it’s because there’s no time or money spent on selecting individual securities. We allocate IndexPlus following the same investment philosophy as the rest of Alm. Brand and subsidiaries. IndexPlus has generated a profit of 4.3 percent during the first 3.5 months, so we're happy with the results."
Bent Sørensen, Head of Marketing & Communications, Sparinvest:
What are you going to do to counter June and possibly a new investment world from Nordea?
"We are of course going to keep track of developments in the the market. We're experiencing a rapidly growing interest in passive management, and we have 45 percent growth in customer intake per annum. This is also why we're launching 10 new index funds for ten specific stock sectors during 2017. The first will be Telecom, Finance and Stable Spending. Based on Sparinvest's index departments, we can put together a portfolio with an average risk profile with an annual percentage rate of 0.48 percent. That is where we believe that we are definitely able to compete with others on the market."
What is your new strategy regarding ETF – and the clear tendency to invest more and more through those means?
"ETFs and index funds are basically the same thing, but the structure is quite different. Our funds have underlying stock, where ETFs are fiscally considered to be financial instruments. Index is tailored to Danish investors and Danish tax regulations. In terms of price, we consider ourselves competitive. ETFs have low costs, but in addition there are currency exchange fees, custodial costs, and trouble getting refunds on paid coupon tax. Not all ETFs can be put in pension custody, so as an investor you have to watch out before choosing an ETF."
Rasmus Bessing, COO, Fund Administration in PFA Asset Management:
What are you going to do to counter June and possibly a new investment world from Nordea?
"PFA welcomes competition no matter whether it is from June or foreign passive funds. PFA believes that active management is the way to go, especially if you, like we do, provide balanced products across all asset classes. We are pleased to say that we can provide clients with both active management and individual consulting at favorable prices that are on par with or slightly higher than the prices that other vendors charge for passive management without individual consulting."
What is your new strategy regarding ETF – and the clear tendency to invest more and more through those means?
"We can apply ETFs in our active management on an equal basis with other financial instruments if it fits with the strategy and matches the ethical values of PFA. However, many ETFs have the disadvantage that they give uncritical exposure to all types of companies, and as such constitute a risk of unwanted ethical exposure.
Christian B. Andreasen, Head of Individual Banking and Wealth Management, Handelsbanken:
What are you going to do to counter June and possibly a new investment world from Nordea?
"At Handelsbanken, we follow developments in the market closely with particular focus on our clients' demands. We work with thorough and detailed examination of our clients' affairs in order to provide the perfect investment proposals, the right product, or the right investment advice. Of course we will also increasingly be utilizing digital tools to further improve the ease and accessibility of the customer experience – also as self-service solutions."
What is your new strategy regarding ETF – and the clear tendency to invest more and more through those means?
"Passively managed products are already a natural part of Handelsbanken's world. Handelsbanken was among the first to launch ETNs – Exchange Traded Notes – which are passively managed products and thus a low-cost alternative to many of the actively managed Danish mutual funds. Of course we will see a rise in demand from Danish clients, so, naturally, we are ready to look into the possibility of providing other types of passively managed products as well."
