Equity Valuation and Portfolio Management

2003 INTERTEK EUROPEAN STUDY

The 2003 Intertek European study deals with the use of financial modeling at European asset management firms.² It is based on studies conducted by The Intertek Group to evaluate model performance following the fall of the markets from their peak in March 2000, and explores changes that have occurred since then. In total, 61 managers at European asset management firms in the Benelux countries, France, Germany, Italy, Scandinavia, Switzerland, and the United Kingdom were interviewed. (The study does not cover alternative investment firms such as hedge funds.) At least half of the firms interviewed are among the major players in their respective markets, with assets under management ranging from €50 to €300 billion.

The major findings are summarized next.

Greater Role for Models

In the two years following the March 2000 market highs, quantitative methods in the investment decision-making process began to play a greater role. Almost 75% of the firms interviewed reported this to be the case, while roughly 15% reported that the role of models had remained stable. The remaining 10% noted that their processes were already essentially quantitative. The role of models had also grown in another sense; a higher percentage of assets were being managed by funds run quantitatively. One firm reported that over the past two years assets in funds managed quantitatively grew by 50%.

Large European firms had been steadily catching up with their U.S. counterparts in terms ...