More money managers are looking to profit from banking-related services as investment and commercial banks globally are battling slow growth and regulatory constraints.
While banks have a long history in money management, few money managers have encroached on investment banking territory. But as new regulations globally attempt to rein in the banks' financial reach, money managers might be in a natural position to fill in some of the gaps — and then some, sources said.
Underwriting and M&A activities are still out of reach for money managers, but managers are expanding in other banking-related services such as securities trading, direct loans and related advisory services as the banks themselves retreat.
“Individually and collectively, managers are more meaningful buyers of securities in capital markets,” said Salim Ramji, director at McKinsey & Co. New York.
“We now have asset managers of meaningful size and scale relative to what they might have been 10 or 15 years ago,” said Mr. Ramji, who also is co-leader of wealth management, asset management and retirement practice in the Americas. “Twenty years ago, a top-five asset manager managed $100 billion in assets; breaking into the top five today would require 15 times that amount.”
BlackRock Inc., New York, the largest money manager in the world with $3.68 trillion in assets under management, is among the most recent to add services that traditionally belonged in the domain of banks. BlackRock plans to launch a bond-matching trading platform available to about 50 institutional investors and clients of the BlackRock Solutions risk management unit. The firm is working with the U.S. Securities and Exchange Commission to build the platform.
BlackRock is also adding global capital markets capabilities. In London, BlackRock appointed Rob Leach in the new position as head of capital markets in the Europe, Middle East and Africa region.
“We've always been seeking efficiencies for clients,” said Richard Prager, managing director and head of global trading within BlackRock's portfolio management group, New York. “We're now doing so on a more robust basis. There just wasn't the same need before because we weren't living in a liquidity-challenged world. ... We're not looking to disintermediate (Wall Street).”
Separately, BlackRock is enhancing its trading infrastructure and an emerging brokers program, which so far has included about 50 emerging brokers.
“Each of these initiatives adds a little bit of liquidity, but none is a silver bullet,” Mr. Prager said. “It has been a journey.”