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Asset managers chastened by market falls

NETHERLANDS - Executives of European asset managers appeared chastened by current market conditions at a conference today, with one saying the sole challenge for 2003 is to survive without losing any more money.

And there were calls for managers to focus on what they know best, transform their strategy to deal with current markets as well as be more transparent.

"The crucial question is to get through 2003 without losing more reserves," said Nordea's head of asset management, Christian Clausen, in a discussion on the impact of market conditions on the asset management industry.

The challenge was to transform a long-term strategy into a short-term tactical approach that minimised losses, Clausen said. The only guarantee an asset manager should give clients is that he is getting the right asset allocation, he said, adding that promising a guaranteed return makes it "impossible" to provide the right product to the client.

"The last three years have forced the industry to grow up," Clausen said. "It's like growing up in a tough neighbourhood."

Henderson Global Investors' chief executive for Germany, Patrik Roeder, said asset managers need to specialize on what they do best. He called for "more focus on what you can do best for the client". And managers must shift from a three-yearly asset allocation review process into a more reactive, month-by-month approach. And adding research capacity where needed was a way to add value for the client.

After years of healthy returns, clients did not perceive risk, the asset managers said. Now, with declining markets, there was a "demand for certainty" said Christopher O'Dea, managing director of international development at US-based Wanger Asset Management. This, he said, was shown by the demand for guaranteed return products. Asset managers needed to be more willing to explain what they are doing.

Generali Asset Management chief executive Gianluigi Costanzo agreed: "Now the client has discovered that there is real risk." This development means that asset managers need to be more transparent towards the client in terms of how the money is invested and what the returns are likely to be.

"Asset managers must got back to asset management - not just replicating an index," Costanzo said. Costanzo said that many asset managers had become "closet indexers". And the current conditions could see pressure on banks, especially in Italy, which bought asset management firms, he added.

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