(updated with correction)
Cost pressures on European money managers are “creating an urgent need to achieve scale and efficiencies through a focus on core competencies,” according to a State Street white paper.
Manager consolidation — both through M&A and fund rationalization — will continue in Europe, as banks look to offload businesses to shore up balance sheets, multiboutiques look to assemble key components and managers look to achieve scale and new capabilities to meet client demand, according to “The Changing Shape of European Investment Management,” part of State Street's Vision series of papers.
“The industry is likely to look very different within five years,” according to State Street.
For example, Aberdeen Asset Management's acquisition of RBS Asset Management's fund-of-funds business, which closed in January, gave Aberdeen an established hedge fund-of-funds offering, while multiboutique BNY Mellon Asset Management's 2009 acquisition of Insight Investment gave it a leader in LDI.
Others might follow the lead of French banks Societe Generale and Credit Agricole, which combined their money management businesses into a joint venture called Amundi in 2009. Amundi now is the third-largest manager in Europe.
All managers will need to cut costs, and reducing the number of strategies to those that are core to a manager will be necessary, according to State Street. Managers had already begun this process in 2009 as a “second wave” of cost-cutting (Pensions & Investments, June 29, 2009).
Over the next five years, assets will migrate into a “barbell” pattern, with asset winners being passive managers, multiboutiques and specialist boutiques “that can offer investors clear, relevant and compelling propositions,” according to State Street.