Money managers owned by global investment banks are re-engineering their business models in response to mounting pressure to earn their keep.
“The successful bank-owned asset manager must prove its worth by winning assets to manage in open competition,” according to Kevin Pakenham, managing director in the investment banking division at Jefferies & Co., Inc., based in London. “Thus bank-owned asset managers will seek to prove their independence and their viability.”
At the same time, governments — particularly in the U.S. — have signaled their intentions to further separate the various businesses that are now combined within investment banks. While details have not been proposed, some analysts believe higher legal barriers could restrict the ability for bank-owned managers to cross-sell to investment banking clients. President Barack Obama last week proposed changes that could force some banks to sell their private equity and hedge fund operations.
Deutsche Asset Management, Morgan Stanley Asset Management and Amundi Asset Management — the firm formed Dec. 31 as a result of a merger between Credit Agricole Asset Management and Societe Generale Asset Management — are the latest examples of bank-owned managers in the midst of reshaping their businesses.
Goldman Sachs Asset Management, while not restructuring, is ramping up recruitment with ambitions to double its business in the next five years, according to Marc Spilker, co-CEO and co-head of Goldman Sachs Asset Management based in New York.
DeAM's CEO Kevin Parker, who is based in New York, is implementing strategic changes aimed at turning the company around. Assets under management remained flat at €476 billion ($674 billion) for the nine months ended Sept. 30. Revenue dropped about 30%, although the money manager returned to profit in the second half of 2009.
In a Dec. 15 presentation, Mr. Parker announced a restructuring that included refocusing RREEF, DeAM's real estate subsidiary, around core competencies. Mr. Parker also said the firm planned to strengthen Asian operations centered on Harvest Fund Management Co. Ltd., a Beijing manager 30% owned by DeAM with about $30 billion in assets under management. In addition, DeAM will continue moving primary investment management activities to Frankfurt, shifting the focus from London and New York to gain efficiency and cut costs.
“The purpose of the changes is to return the business to pre-crisis profitability,” according to a source familiar with the plans who asked not to be named.