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Allfunds Bank: UK offering may struggle to replicate Spanish success

22nd June 2005

Spanish investment fund specialist Allfunds Bank is to launch in the UK.

Allfunds Bank, a joint venture between Sanpaolo IMI and Abbey's parent Grupo Santander, will launch its third-party distribution platform in the UK. The venture accounts for about half of the third-party fund distribution market in Spain, but the company is unlikely to enjoy the same strong performance in the UK.

Allfunds Bank's third-party funds platform in the UK will primarily serve Abbey, Santander's subsidiary, but will be independent and so could also target banks, financial supermarkets and brokerage firms, as it does in its other markets. It does not sell directly to the public.

Allfunds Bank was created in 2000 to offer an open architecture platform for the distribution of mutual funds to Spanish banks. The platform currently has more than 7,000 funds from more than 40 fund managers. According to Juan Alcaraz, managing general director at Allfunds, the platform is continuing to grow despite the cautious tendencies of Spanish investors. In fact Allfunds Bank grew from its launch in 2000 to account for half of the E30 billion in third party funds sold in Spain in 2004.

However, several factors limit its growth potential outside of provision to Abbey in the UK. First, its primary target market - banks, financial supermarkets and brokerage firms - are not the main distribution channels for retail funds in the UK. Instead, IFAs account for the majority of the retail market (65% of all retail mutual fund sales in 2003).

Second, while many banks in the UK offer third party funds, they tend to offer a range from a few carefully selected providers instead of trying to offer access to the whole market.

One area where Allfunds Bank is likely to find an appetite is in the intermediary market, where a supermarket-style range of funds tends to be most relevant. But IFAs already have three significant players in this area to choose from: Cofunds, Fidelity's FundsNetwork and Skandia. Unless Allfunds can offer something measurably different it is unlikely to attract significant business in this segment.

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