Asset management (continued)
ING Investment Management
ING Investment Management (ING IM) is the principal asset manager of ING Group with EUR 332.5 billion in assets under management at the end of 2008 compared to EUR 390.2 billion at the end of 2007. ING's investment management business continued to pursue its goal of strengthening its position in global asset management. Growth was constrained by the financial turmoil and the dampening impact it had on investor enthusiasm. Despite this, ING IM's global distribution reach and strong emerging markets presence, together with its scale in fixed income, strong brand recognition and access to a global network of ING channels and flows held the company in a relatively solid position in challenging market circumstances.
The company fared relatively better in the institutional segment where it managed to maintain and in some regions attract net inflows. Retail flows were adversely affected by investors moving to lower-risk products or those with a capital guarantee.
At the end of the year, the investment management business delivered investment performance with 46% of mutual fund assets outperforming their peer median and 61% of mutual funds outperforming their benchmark on a three-year basis. Morningstar awarded 76% of ING's ranked mutual funds with 3 stars or higher.
All three regions – Europe, Americas and Asia/Pacific continued to focus on the core strategy of delivering a wide range of innovative investment strategies to ING's global network of businesses and third-party clients.
This was achieved by all three working closely to leverage scale, investment expertise and best practices, in order to maximise cross-selling opportunities. An example of this was the successful distribution of ING's European investment management Global Currency strategy in Japan in close cooperation with the investment management business in the Asia/Pacific. The fund successfully attracted EUR 1.3 billion of inflow.
The strengthening of risk controls and risk reporting procedures across the regions was improved.
In the second half of the year, as the financial crisis worsened, the investment management businesses in Europe, the Americas and Asia/Pacific focused very much on client communication, advice and client retention. There was very close cooperation among all three regions to assess market, credit and operational risk exposures as well as thorough discussions about risk mitigation scenarios.
ING Investment Management became a signatory to the United Nations Principles for Responsible Investing (UNPRI), which is designed to guide investment decision-making with a view to corporate responsibility considerations. (See also the Corporate responsibility section.)
Europe
Assets under management fell 15% to EUR 129.5 billion. Third-party AuM declined by 19% to EUR 81.6 billion and proprietary business AuM was 8% lower at EUR 48 billion. Limited outflows from mutual funds were recorded as a result of the market turbulence. The business unit strengthened its position in the fiduciary market through a series of new relationship agreements and the acquisition of Altis Investment Management. Altis is a leading multi-manager specialist team based in Switzerland. The acquisition was in line with the business' ambition to be a leading solutions provider. In addition, the institutional business in the Netherlands was strengthened with ING/AZL entering into agreements to provide fiduciary management services to two major pension funds, Pension Fund Social and Economic Council of the Netherlands (SER) and Public Authorities, and the Will Niemeijer Pension Fund as well as TVM Verzekeringen. ING acquired AZL, a Dutch provider of pension fund management services, in 2007 to boost its scale and market strength in the European pension business.
ING IM benefited from the growth of ING's insurance and pension businesses in Central Europe. Operations in six Central European countries serve an increasing broad spectrum of clients.
Despite the difficult market situation, ING IM established its presence in the Middle East, which included local investment capabilities, taking advantage of investment opportunities arising from global economic changes as well as growth opportunities in the region.
Americas
Assets under management fell 8% to EUR 139.4 billion. Third-party AuM declined by 7% to EUR 74.9 billion and proprietary business AuM declined 10% to EUR 64.5 billion. The financial turmoil dampened the willingness of both retail and institutional clients to add to their portfolios during the year. The business focused its strategy on raising the visibility of three significant franchise strengths – Senior Bank Loans and Small and Mid-Cap Equity. The Senior Loan team was selected by the USD 190 billion California Public Employees Retirement System (CalPERS) as one of three bank loan managers to manage future CalPERS allocations to senior bank loans. ING IM's Senior Loan team also won a EUR 193 million mandate from the Massachusetts Pension Reserves Investment Management Board during 2008. In addition, the fundamental equity teams in the US and the Canadian equity group continued to be bright spots with recent sales wins.
The retail side of the investment management business realigned its sales force to focus on improved client segmentation and increased traction with broker dealer investment platforms and with ING's Retirement Services Group. Despite challenging market conditions there were several positive developments during the quarter. Separately Managed Accounts sales increased by 13% during the year from EUR 414 million to EUR 466 million, assets were added to the VP Growth and Income Fund through a merger, and the ING Global Target Payment Fund, one of the first open-end managed payout funds, was launched in September.
Pomona Capital, part of the Alternative Assets Group, saw strong ongoing fundraising of EUR 860 million in the Private Equity Fund of Funds. Performance in ING's Fund of Hedge Funds was relatively solid despite difficult market conditions and there are good prospects for the marketability of this fund. In spite of the challenging market conditions, investment management in Latin America continued to deliver strong relative investment performance across the region supporting growth in ING's mandatory pension and annuities businesses. In its third-party business, assets under management in institutional private pension plans continued to grow offsetting weakness in retail mutual funds. In January 2009, ING launched its Chilean mutual fund company.
In the coming year the business will place increasing emphasis on returning to its basic core strengths and improving its investment performance and product development for its customers. In addition, the business's already strong risk management resources will be further improved.
Asia/Pacific
Assets under management fell 25% to EUR 63.6 billion. Third-party AuM fell by 19% to EUR 48.4 billion and proprietary business AuM declined by 39% to EUR 15.2 billion. Equity funds in the region experienced outflows, but bond funds received net inflows. Despite the uncertain economic climate, ING was successful in booking significant new and prestigious mandates with the Monetary Authority of Singapore (EUR 183 million), the Bank of Thailand (EUR 143 million), Bank Negara in Malaysia (EUR 129 million) and GSIS in the Philippines (EUR 215 million).
On the retail front, major fund launches included a Real Estate Fund in Hong Kong and the Taiwan Focus Fund, which will be marketed around the region. The launch of the High Yield Currency Fund in Japan resulted in record net inflows (EUR 3.58 billion). ING IM expanded its geographic footprint by opening a representative office in Beijing.
Risk management was a major focus in the business. Risk controls were strengthened and a more frequent risk reporting process was conducted to consolidate risk issues for management. In 2009, there are plans to further strengthen risk awareness and regional investment risk governance.
Goals and ambitions
ING Investment Management gives ING a significant global presence through its broad offerings of a diversified mix of products with solid performance.
ING IM is committed to further strengthening partnerships with ING businesses and developing third-party business opportunities. The business also strives to increase investment performance for clients and to maximise the use of ING's risk management skills.
Both the retail and institutional sides of the businesses will continue to focus on close customer contact and are committed to working with clients to manage their investments through turbulent times.
With the likelihood of difficult market conditions continuing in 2009, cost containment measures have been taken with due care to preserving the investment expertise and full commercial growth capabilities of the business.
ING IM will focus further on strengthening the organisation to capitalise fully on the recovery after the crisis. This includes enhancing operations, investment platforms and distribution capacity.
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