Broadridge Financial Solutions, Inc. (BR) Earnings Call Transcript & Summary

Hello. Thank you for joining us today for this webinar session. My name is Aidan Paterson, and I'll be your host for today's discussion. In this webinar, we're going to be speaking about brand, examining what is behind a successful brand, what attributes matter most to fund selectors and how these preferences are shaping the asset management industry. The reason that we're speaking about this today is that Broadridge has just published the latest edition of the Fund Brand 50 report, a study that profiles and ranks the top 50 asset management brands across Europe, North America and Asia, as well as the top brands globally. Here's how the rankings work. We conduct extensive interviews with over 1,200 top third-party fund selectors and aggregate their responses to power our Fund BioFocus Intelligence Solution, which is used to generate the report. We take these responses to rank asset managers across 10 attributes and aggregate these into what we term a total brand score, which we use for the overall global and regional rankings. Here is an example of what that looks like. This is from last year's report, covering 2022 data and showing BlackRock's performance in Europe. It's a good example because you can see the firm's consistency. It ranks #1 or #2 for all brand attributes, except for social responsibility and sustainability. So this really stands out as an area for improvement. So what are these brand attributes? You can see them here. They vary slightly between the 3 regions, but broadly cover the same ground. These are the attributes that we used in APAC, ranked in order of preference. This changes from year-to-year. So this is the ranking of attributes preferred by fund selectors for the year 2023. So what global trends did we see this year? Well, the first thing that we learned is that the number of truly global managers are shrinking. Our usual top 25 is the top 23 this year, there's not enough firms met our criteria to be considered a truly global brand. And it's worth pointing out that our criteria aren't that stringent. We have a relatively low hurdle of being a top 100 brand in each region surveyed to qualify as a global brand. Now this is the second year in a row that the pool of global managers shrunk, possibly indicating the beginning of a trend. But one thing we are seeing is that those managers that can build and sustain a global presence, the incumbents at the top of the leaderboard are proving increasingly difficult to dislodge. So what does help a manager climb the rankings? Well, this year, investor appetite for passive products was a big differentiator. While ESG played a role, it was less impactful than in previous years. Overall, one of the main things we saw was fund selectors expressed a preference for stability, likely due to the turbulent market conditions experienced in the last few years. This led to a consolidation of strength for the large global managers at the top of the leaderboard, although there were interesting regional narratives playing out behind this. To get a more detailed analysis of these regional trends, we'll be going to our experts in Europe, APAC and the U.S. to get their take on the brand trends driving FB50 2024. First off, we go to Barbara Wall for a deep dive into European trends. Over to you, Barbara.

Thanks, Aidan. While 2023 proved to be a disappointment for the European long-term funds industry, net losses of $46 billion were only around 1/5 of the $213 billion withdrawn in 2022, which provides some perspective in a year marked by heightened geopolitical tensions and macroeconomic uncertainty. However, there is no doubt that 2023 was particularly tough for active managers while passive competitors continue to gain momentum with ETFs [indiscernible] powerful drivers. This is reflected in the top 10 brand ranking and also further down the league table. While the top 5 brand ranking remains unaltered from the previous year, with JPMorgan continuing to snap at the heels of BlackRock and increasing its total brand score by a significant margin, passive powerhouse vanguard shimmies up 4 places to enter the top 10. In terms of brand credentials, Vanguard scores highly as a key international player and proved solidity. Vanguard has taken its time to build a brand in Europe and has been circumspect in terms of fund launch activity, preferring the lattice model approach. The U.S. manager has significantly fewer ETFs on offer compared to its rivals. Passive peer, iShares also moved up the ranking from 8th to 6th place unseating Robeco in the process. iShares top brand attributes are key international player, appealing investment strategy and again, solidity. iShares has a very wide product range, and as 1 selector points out, there is no way of avoiding this all-encompassing ETF provider. Following the ESG backlash last year, ESG convictions may not be the game changer they once were. However, it is noteworthy that 50% of our top 10 brands score highly in this area. Despite dropping in the ranking, Robeco remains in pole position for its ESG credentials. Another notable ESG brand, Nordea, fell out of the top 10 ranking in 2023, however, the group is building its presence in the alternative space, which could help it recover support this year. After struggling to capitalize on the surge in investor interest in the fixed income investment category, falling 3 ranks to 12th place in 2022, PIMCO regained its mojo in 2023, starting back into the top flight. After rallying towards the end of last year, fixed income is on everyone's radar. The focus on fixed income could have some impact on the brand movers and shakers in 2024. While the top 10 balance tipped in favor of local groups in 2022, in 2023, we see some movement in the opposite direction, with U.S. brands accounting for 6 of the top 10 brand slots. Moving on to the top 10, the passive trend is further evidenced by the entry of Xtrackers into the top 50. According to selectors, the group's top brand attributes include key international player, again, and innovation adaptation to market change. At this point, I'd like to shine the spotlight on active managers. PIMCO wasn't the only active strategist to see an uptick in its brand ranking, with boutique outfits such as Artemis also rising in the brand league table. We single out Carnegie Fonder for a special mention. It isn't the fastest riser in 2023, but after its acquisition by the Carnegie Group, it has ticked the interest of selectors on a number of levels. Some acquisitions can be brand destructive, but here is an example of a firm that has been able to capitalize on a marriage. Following the acquisition by the Carnegie Group in 2022, Carnegie Fonder has been able to offer a wider product range, including private markets coverage. This has been valued by fund selectors, many of whom are looking to increase their exposure in this segment. Carnegie Fonder has also had a strong brand presence in the Nordics and is valued for its expertise in Swedish equities. These days it's handy to have more than one U.S. team. With slowing growth weighing on the global economic outlook in 2024, product providers will need to play to their strengths and flex their brand attributes to navigate what is fast becoming an oversupplied and fiercely challenging European funds market. Thank you for listening.

Thank you, Barbara. A lot of food for thought in European transition. One thing that really stood out to me was a cautious investor outlook as we saw a number of firms benefit from an appetite for passive products and guaranteed returns. Next we go to Evonne Gan for her commentary on asset management brand trends in APAC. Evonne, over to you.

Thanks, Aidan. Funds flow trends in APAC [indiscernible] can be summarized in 3 words: stability, income and passive. After difficult 2022, asset managers in APAC faced another challenging year in 2023. So apart from the continuing regional economic and geopolitical uncertainties, asset managers are also dealing with a cautious investor sentiment in the region. As such, managers with larger AUM and stronger brand recognition benefited from this shift in appetite. Against this backdrop, for the second year in a row, there was no change in the top 5 FB50 rankings in APAC. Fund managers often attributed the global major strong brand rankings to drivers such as having more established track records, being expert in what they do, offering investment strategies that were popular with clients and having a wider range of comprehensive solutions. Zooming into China. JPMorgan was the only global major rank among the top 10 fund houses. The fund has been active in product development, offering innovative ETFs such as foreign investor ETF, active ETF and thematic ETFs. JPMorgan has also intensified their localization efforts and increasingly taking a leaf from local managers' playbooks when it comes to online and offline marketing campaigns. Elsewhere, global managers continue to lead. BlackRock was a top-ranked firm in Singapore and JPMorgan took the first place in Hong Kong, while Fidelity was also second ranked in Japan. Meanwhile, Alliance Global investors continue to rank highly in Taiwan, and AllianceBernstein was also in the top 3 in both Taiwan and Hong Kong. While AllianceBernstein's ranking remained largely unchanged this year, its underlying brand preference has actually improved. The firm has an excellent track record of dividend payment, which fulfills persistent demand for stability and income in many APAC markets. The firm has also created many highly informative videos during the pandemic, and this has helped to solidify brand loyalty.

Thank you, Evonne, very interesting analysis. One point that stood out to me was global managers taking queue from local managers in the Chinese market, and they'd be wise to do so. One of the big stories of FB50 in the last few years has been the rise of global managers in China. But this year, we're seeing Chinese fund selectors turn their back on global firms just as quickly as they took up with them as several global managers take a heavy fall down the rankings in China. Finally, we go to Jeff Tjornehoj for his analysis of the U.S. asset management industry. Over to you, Jeff.

Thank you, Aidan, and welcome, everyone, to the fourth edition of Fund Brand 50 U.S., the preeminent source for fund branding insights for U.S. fund managers. In a sharp turn away from the depressing returns that swapped nearly all assets in 2022, 2023 brought a windfall. Domestic stocks hit the gas pedal and crossed the finish line up 24%, international equities gained over 19% and a well-timed fourth quarter rally saved bonds from an unprecedented third consecutive year of losses as they returned just under 2%. The contrast between resilient equities and fragile bonds was an opportunity for asset managers to support their clients with topical and timely communications about shifting market conditions. Top brands always score well for keeping their clients informed and helping clients through both setbacks and successes as a hallmark of their efforts. Fund flows are dominated by countless decisions made by intermediaries on behalf of individual clients to buy or sell a fund. To help the intermediaries be successful at their craft, the funds industry has been busy turning on new products to meet demand in the form of model portfolios, interval funds, separately managed accounts, actively managed ETFs and more. Overall, a strong brand is an asset in product development that provides many benefits and contributes to the success and longevity of the business. By investing in and nurturing their brand, companies can create a competitive advantage that sets them apart in the marketplace and drive sustainable growth. Our top 3 brands are known to do these things well and not surprisingly, they've been the top 3 brands for 4 years running. This year, we've had a shakeup at the very top, as Vanguard emerged victorious and nudged out BlackRock. But that's not our only come from behind story. Goldman Sachs jumped 3 positions from 10th to 7th, and First Trust made massive strides with fund selectors and gatekeepers as they moved up from 14th to 10th place. Of course, when some firms move up, it follows that some have to move down. And while I don't want to give too much away, I will say that somewhere out there, a bighorn sheep has lost some footing on the mountain. Aidan, I'll send it back to you.

Thank you, Jeff. A very interesting point there about brand as a driver of product development. I think we're seeing this as the big firms find new ways to strengthen their position on top of the leaderboard. And one of the key strengths they can offer is a wide range of products that encompasses innovative new offerings. So that wraps up our regional coverage. I'd like to thank all 3 of our experts for their contributions. 2023 was an interesting year for asset management brand trends. And I think it's safe to say that we'll be seeing many of these trends continue into 2024. FB50 is available now. You can place an order and access the report both on our distribution insight platform. If you're not already signed up, it's free to register, and we post a selection of free content, including articles, white papers, podcasts and videos. You can also access Fund by Focused Intelligence via the distribution insight platform. To track fund, select the rankings and see how you're faring on an ongoing basis. If you're not an FBFI client and would like to schedule a demo or ask a question about FBFI, get in touch via the contact details at the end of this webinar. That's all from us. Thank you for joining us today. We hope you enjoyed the session.