Europe’s Fastest Growing Asset Manager Hits the Brake on Inflows

  • Nordea is considering closing some funds to all investors
  • Nordic lender seeing inflows from Italy, Spain, Germany

Nordea Bank is learning there can be such a thing as too much money.

The pan-Nordic lender is putting a brake on inflows to several of its funds following a sudden surge in cash transfers from all over Europe. Through August, the fastest growing asset manager in Europe this year saw inflows of 14.6 billion euros ($16 billion), according to Morningstar Inc., raising the amount under management to more than 200 billion euros. That’s making it harder for Nordea to generate excess returns.

“Over the past four years we’ve had a very strong position in the top 10 with quite sizable flows,” Christian Hyldahl, chief executive officer of Nordea Asset Management, said in a phone interview from Copenhagen on Friday. “But this year, we’ve really peaked.”

The jump can be attributed to two main factors: First, the bank has built up distribution across Europe to increase income from less capital intensive businesses. Second, the strong economies of the Nordic region and an asset management strategy that focuses on stable returns have proved popular as clients try to cope with record low yields and volatile markets.

The bank’s fastest growing fund, the Nordea 1 - Stable Return Fund, received 10 billion euros in new cash through August, equivalent to a growth rate of 126 percent, bringing it to about 20 billion euros in size. The fund, overseen by Asbjoern Hansen in Copenhagen, has had average annual returns of 7.8 percent in the past five years.

“It’s a very rare growth rate for such a large fund,” said Matias Mottola, senior research manager analyst at Morningstar. “These flows are really a result of them becoming a European fund provider selling, developing products that are of interest to investors outside the Nordics. That’s really where the growth has come from.”

Nordea says a lot of client interest has come from Italy, Spain, Switzerland and Germany.

“They came up with this more than 10 years ago,” Mottola said. “So they were out there in the market with a track record when the interest for these types of funds grew.”

But the sudden inflows are causing growing pains. Nordea has had to turn its back on new customers to avoid reaching a size that makes it too hard to generate excess returns, according to Hyldahl. The bank “soft closed” its Stable Return fund after it reached its investment capacity, given the underlying market liquidity, and is now considering shutting it for all inflows, he said.

The inflows have been institutional but also “very much” from retail investors, he said.

“As a prudent fund manager you should limit flows to that specific fund,” he said. “But as an asset manager, of course, we have ambitions to grow and we have many other products. Hopefully, we can continue to grow, maybe not at that pace, but at least above the industry average for the coming years.”

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