adminLONDON. — Allianz has fallen down the ranking of the world’s largest investment groups by assets for the second year running, after investors pulled $176 billion from Pimco, its bond fund house, in 2014. The German insurer slipped to fourth spot in the table after being overtaken by State Street, the US passive fund company. Allianz’s assets fell more than $200 billion to $2,1 trillion in the 12 months to the end of 2014, according to Towers Watson, the investment consultancy that compiled the ranking.
Analysts blamed Allianz’s descent on the fallout from the contentious departure of Bill Gross, Pimco’s founder, whose move to Janus Capital last year triggered billions of dollars of outflows from the bond house. Allianz is widely expected to struggle to regain third spot next year.
Mr Greggory Warren, senior stock analyst at Morningstar, the research group, said: “Those investors who were already unhappy with performance (at Pimco) just threw in the towel (last year). The pace of the outflows has lessened but it is still ongoing. It can take anywhere from five to seven years for those flows to recover.”
Mr Robert Callagy, senior credit officer at Moody’s, the rating agency, agreed: “Pimco is a big part of (Allianz) and it suffered material outflows after the departure of Bill Gross. While those outflows have slowed, they continue, even many quarters (later).” French bank BNP Paribas also dropped four places in the table, to 14th, while Franklin Templeton, the US fund house that has been hurt by turmoil in emerging markets, slipped out of the list of the top 20 asset managers for the first time in five years.
It suffered $6 billion of outflows in 2014, and is on course for another difficult year, with investors pulling another $33,5 billion since January, according to data from Morningstar. Franklin Templeton, BNP Paribas, Allianz and Pimco declined to comment. State Street’s ascent in the ranking has highlighted a power shift in the asset management industry towards passive fund companies.
BlackRock, Vanguard and State Street, the US investment behemoths with rapidly expanding exchange traded fund businesses, now occupy first, second and third spots in the ranking respectively. “The big problem (for active fund companies) is performance has been so terrible for active managers over the past ten years relative to the benchmark. This has really fuelled the growth in passives. I really don’t see anything stopping that path, said Mr Warren.”
The analyst added that an anticipated rule change in the US, that could require financial advisers to abide by a “fiduciary” standard that compels them to act solely in the best interests of their clients, could funnel even more money into cheaper, passive funds. “I don’t care who you are but if you’ve got active US equity products, you are in outflow mode,” he said.
Mr Callagy agreed: “Obviously there has been a huge shift in the industry towards passive products. We think this will continue. We don’t think active management is dead, but we think it will take a sustained period of out-performance for managers to see money flowing back. Investors are very focused on cost.”
Asset growth in the industry last year predominantly came from large passive fund houses at the top of the table and smaller, specialised fund companies near the bottom, according to Towers Watson.
Mr Liad Meidar, co-founder of Gatemore, the investment advisory firm, said: “For pension schemes looking to get exposure to efficient asset classes, active management has very little to offer. The only place you can find alpha today is with small and niche strategies. I don’t think there is an easy answer for large fund houses.”
Nonetheless, Goldman Sachs, the US investment bank that has the bulk of its fund business in active management, managed to climb four places in the table to take 11th spot after its assets increased by $100 billion to $1,2 trillion. — FT.
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