Historically, Spain has been a highly bank-banked country, leading to a dominance of the investment fund industry by large banks. However, in recent years there has been an increasing presence of independent entities who are increasing their market share in fund management. In this scenario, banking institutions continue to be the main actors in their marketing and maintain a share of about 90% in the distribution of these products.
Paradoxically, some of the most profitable funds in the global category are precisely those managed by smaller Spanish managers. However, this is a David and Goliath controversy, as these vehicles are often overlooked by large banks when building their investment products. For this reason, one of the big questions we ask ourselves in this sector is: how is it possible that the most profitable funds stay off the banking radar? And of course, what are the consequences of this situation for investors?
According to data from Inverco, Spanish banks represent about 74% of total assets under management in investment funds. This figure has decreased slightly in recent years due to competition from independent fund managers, however it is still a significant figure indicating the strong dominance of banks in this market in our country, something we share with other European countries. Do not share where the representation of independents is high in fund managers.
The dominance of banks in the distribution of investment funds in Spain has led to some discrimination against funds managed by independent Spanish boutiques, which leads to greater difficulties in accessing bank distribution channels. However, mutual fund performance is one of the main criteria investors use to select their investment products, and smaller fund managers often outperform larger fund managers over the long term.
The long-term outperformance of independent fund managers is largely due to factors such as active management and the ability of these firms to invest in smaller investment opportunities that are less followed by larger banks. Also due to the fact that independent fund managers and larger firms affiliated with banking or insurance groups have different business models and investment approaches that can affect the profitability and success of their funds. Added to this is the fact that independent management allows for greater flexibility in fund management without being influenced by the commercial interests of large banks, which ultimately offer their own products to achieve profitability, not those of those of products that are actually best suited for them. Customer needs.
Independent managers, who are usually owned by management companies, conduct their activity to manage the same funds over a long period of time, a fact that fosters a great alignment of interests and is even more so if they manage their financials. Assets compromise the environment in the process. background.
The big banks also primarily fund marketing from large foreign managers, which hurts Spanish independent managers who do not have the same capability in terms of brand image and marketing and distribution teams. Discrimination against small fund managers in Spain is a problem that affects profitability and competition in the investment fund market. For this reason, we believe that in order to promote competition and a level playing field, distribution alternatives should be explored and diversity in the selection of funds by investors should be encouraged.
It is important to consider that in the fund management sector, it has been shown that David adds value and outperforms Goliath in its job of providing financial advice to individuals. Therefore, it is necessary to promote greater diversity in the money supply to ensure that customers have access to a wider variety of products, which comes from greater competition, as investors will be the first to appreciate.