Algebris Investments head of business development Douglas Branson on the role of specialist asset management, evolving challenges for wealth managers and four key tenets of client communication
Where – and why – are you anticipating demand or fund-flows from UK-based wealth managers and their clients over the next 12 months?
2025 has seen continued strong flow into passives but clients are once again showing greater interest in active funds as they consider how best to balance the two exposures at the portfolio level. Clients tell us they use passive vehicles more for core exposures and active funds for investment opportunities that require a more specialist approach to generate alpha.
Now, while it does not seem that wealth managers are necessarily reducing their overall equity and credit exposures – although, at the margin, there is some reallocation to market-neutral and absolute-return strategies – there is a clear effort to adjust the composition within equity and credit. Most obviously, this is at the regional level, but we are also seeing it at the sector level.
We continue to see appetite for our credit strategies, both financial credit and global credit, as UK wealth investors look for income/yield – and where there is room for further spread tightening and value in areas such as the subordinated debt of financials, US and European corporates and EMD.
As far as equities are concerned, many sectors are expensive, so we have clients looking to reduce these allocations in favour of areas that present a genuine value opportunity – and European banks are perhaps the starkest example of this, being one of cheapest sectors despite three years of positive earnings revisions.
It is hard to pick holes in the fundamentals for financials: over the last three or four years, the two main headwinds of low interest rates and tight regulation have become significant structural tailwinds. On top of this, the opportunity set across global financials is strong.
How are you planning to address and serve that interest?
Being a specialist asset manager, with extensive experience of investing in financials across the capital stack, as well as specific expertise in global credit, Algebris is well placed to provide solutions for allocators and investors looking for the characteristics described above.
Over the last few years, the firm been on a significant drive to commit to the UK market. We now have funds on 23 different platforms, our funds are priced competitively and our brand and expertise are more accurately and widely understood.
We can demonstrate consistent risk-adjusted returns through active management over a prolonged period through a number of challenging market environments. One proof point of this recognition is that Algebris Financial Equity won the Specialist Equities award at the Investment Week FMYA 2025.
Are you seeing a divergence in the demands of UK wealth managers versus, for example, their peers in Europe or on the institutional side in the UK?
There are similarities and differences. Broadly speaking, it seems there is heightened interest in specialist strategies and alternatives, given where we are in the market cycle. Private markets remain an area of common interest – but also of rising concern. Related to this, UK wealth managers seem slower to adopt semi-liquid structures that provide access to private markets.
As mentioned above, ETFs (both passive and active) are a shared interest but our sense is that European wealth managers are further along the path in terms of committing to active ETFs. We are seeing UK wealth managers more prepared than they might have been in the past to consider allocating to sector funds and investing in areas they have not previously.
This is most likely a reflection of where we are in the market cycle – that is to say, allocators are recognising that what may have worked in terms of portfolio allocations in the last three or four market cycles will not necessarily work as effectively going forward. This means that certain asset classes, sectors, regions and strategies are now part of the overall analysis for allocators and portfolio managers. Using a wider lens, one of the primary similarities is consolidation, with UK wealth managers being front-of-mind.
As a business, how do you define ‘alternative’ and ‘private’ assets and to what extent should asset managers be looking to service investor demand here?
Over the years, the definition of ‘alternative’ has shifted and morphed depending on where we were in the market cycle and what strategies might have been considered of particular interest at the time. The simplest definition really is ‘strategies that offer an uncorrelated or differentiated return profile to traditional equity and bond funds’.
It is important not to become too bogged down in defining particular funds as ‘alternative.’ I appreciate that many wealth/portfolio managers have an asset allocation framework that puts exposures and funds into specific buckets – and we need to fit into this approach.
That said, what wealth managers and their clients want are investment ideas and access to opportunities that can be combined in portfolios to achieve the desired balance of market beta/directionality and alpha generation – and the appropriate balance of participation and protection.
On private assets, this is clearly front-of-mind for a lot of people, with evergreen funds and LTAFs regularly featuring in conversations with clients. Given the nature of private markets, it is vital that investors are not caught up in the excitement and that they fully understand the liquidity implications and time-horizon characteristics of investing in a private credit or equity fund. As with all strategies and funds, ensuring a private markets allocation blends well with exposure to public markets is fundamentally important.
‘ESG is dead – long live ESG 2.0’ – your thoughts as a distributor, please?
ESG is not dead and it is crucial our industry continues to evolve in terms of its understanding and adoption of ESG and sustainability. The criticism of ESG investing in the last two or three years is part of the evolution of its adoption and place in investment management. Algebris is a committed active fund management firm that has integrated ESG throughout its corporate profile and its fund management processes.
What drives your approach to client communication?
And is there a case for focusing on attracting the ‘right’ type of client? Our communications approach focuses on the tenets of transparency, candour, honesty and timeliness. The process of raising assets has evolved over the years and ‘selling’ is not the same as it was.
By sticking to these four tenets alongside understanding and anticipating when Algebris’ offering might be most relevant, our aim and hope is to be on the appropriate radar and accessible at the right time so it is straightforward for a wealth or portfolio manager to allocate to one of our funds.
One way we are able to demonstrate this is when there are significant events in the asset classes and sectors in which we are specialists and that we invest in. This is the most important time to proactively communicate in a transparent and candid manner so that allocators and their clients have all the available detail and insight to make informed decisions.
We like to work with clients who want to build a long-term relationship based on trust and are prepared to commit to investing through full market cycles. The success of this is influenced by how we interact and communicate with clients.
Outside of work, what is the strangest thing you have ever seen or done?
The truth is that the strangest thing I have ever been involved in was the pandemic and lockdowns. This was an extraordinary – in the truest sense of the word – period that, looking back, felt like a disaster movie. The entire planet and every individual on it was impacted.
May we have two book recommendations, please – ideally, one with an investment connection?
You may have three! Nonviolent Communication by Marshall B Rosenberg, Too Big to Fail by Andrew Ross Sorkin and Its Always Summer Somewhere by Felix White.
Gazing into your crystal ball, what does the asset management sector look like 10 years from now?
From a top-down perspective, it is reasonable to expect the consolidation trend to continue and, within this, it will be interesting to see if the polarisation of the behemoth asset management firms and the more specialist, focused managers continues.
Also, fund researchers and allocators will I think continue to become increasingly sophisticated and this may lead to fewer differences between, say, wealth manager fund selectors and institutional consultants. Many wealth management firms have been or are reducing their fund buy-lists and it is reasonable to expect that, in 10 years’ time, these lists will be even shorter.
Over the same time period, AI and technology-enabling strategies will have had a noticeable impact on the asset management industry, with perhaps asset allocation decisions and execution being made more efficient. It seems likely also that blockchain and tokenisation technologies will have evolved to have a positive impact on how the mutual fund industry operates.
Lastly, 10 years from now, we will look back and realise that active management will have retained its place as an important complement to passive vehicles. This is predicated on those active funds that have survived being managed through a robust and consistently-proven investment process that provides appropriately-priced access to asset classes and investment opportunities that are not replicable in a passive investment vehicle.
“Allocators are recognising that what may have worked in terms of portfolio allocations in the last three or four market cycles will not necessarily work as effectively going forward.
