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S&P Global Market Intelligence comes to the UK and Eurozone

Early 2018 will see S&P Global Market Intelligence, through its S&P Global Research Europe Ltd unit, bring its fund strategy business to the UK and the Eurozone, targeting wealth managers and investors.

Mike Thompson (pictured), Managing Director at S&P Global Market Intelligence, explains that his team works with major managers on a sub-advisory basis, with USD41 billion in assets under management.

“Currently our business is mainly in the US,” he says. “With the current business now five years old, we are at a point where we feel confident we can export it and transform it to meet other markets’ needs.”

The offering comes in eight risk delineated portfolios, described by S&P Global Market Intelligence as maps—short for model allocation portfolios. “They span the gamut in terms of investors’ expectations of risk and returns and we manage those through tilts on a quarterly review and weekly meeting of our strategy committee.”

The firm uses many models to arrive at quantitative decisions plus a qualitative approach. “A qualitative decision is great if you can pretend that the world repeats itself, but there is never a moment when a model is represented completely perfectly with what has happened in the future. Markets can’t see things coming and models don’t have the ability to factor in events that are clearly coming but they haven’t experienced before.”

S&P Global Market Intelligence uses a base model plus a series of outputs to stay informed. “If five models are saying the same thing you feel you are on a trend,” Thompson says.
The models will be modified for the UK and Europe because of underlying currency components and a cultural change of attitude.

“There is a bias towards more local assets in the UK,” he says. “Regardless of global prospects, sterling based investors tend to hold a higher percentage of home assets. We realised that it represents a big inefficiency in the global markets. Everything is more global but what’s different is that there are independent and local policies around interest rates as bank policy is idiosyncratic which will alter the risk return dynamics.  Transporting our methodologies requires a nuanced approach.”

The price for the wholesale research from S&P will be 15 basis points of the advisers’ assets. “Where we expect to get the most traction is at the building society and more mainstream level,” he says. “It’s less international financial concerns, more main street local financial establishments.”
The rise of robo advisers does not pose a challenge for him. “One of the challenges of robo advisers is that their technology is fantastic making it all fluid and intuitive but in some ways at the heart, it is mostly driven by algorithms which is what keeps their expenses low. Fundamentally we think there is a happy medium between quantitative and qualitative and the robo adviser need to sort that out.”

Thompson concludes: “There is more than a century’s worth of heritage in our business and we have a long competitive track record through many different types of markets. The UK and Eurozone offer excellent opportunities.”

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