European money managers are taking advantage of the overall shift to defined contribution plans from defined benefit plans and have greater opportunities in acting as alternative lenders, a report from Moody’s Investors Service said.
Those opportunities, however, face regulatory and competitive challenges.
The report compares eight European money managers: Aberdeen Asset Management, Amundi, Fidelity Worldwide Investment, Intermediate Capital Group, Man Group, Mondrian Investment Partners, SAMSchrodersnt Holdings and Schroders.
“The asset management industry here in Europe is undergoing significant changes not only prompted by regulatory initiatives, but also because of the structural changes in investment behavior and competition,” said Soo Shin-Kobberstad, vice president, senior analyst at Moody’s, and co-author of the report, in a telephone interview. “We see huge amounts of capital moving from defined benefit to defined contribution.”
U.K. pension reform enacted in April that enables pension plan participants to buy investments other than annuities in their plans has also helped the shift to defined contribution.
Of the eight top money managers, Moody’s said Aberdeen, Fidelity and Schroders have “an edge” in the shift to DC from DB plans because their infrastructures enable them to take advantage of the shift.
Ms. Shin-Kobberstad also said constraints on European banking are resulting in more money managers, both alternative and traditional, becoming more active in lending. Amundi, ICG and Man Groupare particularly active in that space, the report said.
Among other challenges is the evolving regulatory environment, which requires upgrades to skills and systems, considerably increasing the costs of compliance, according to the report. Larger managers such as Aberdeen and Amundi have an advantage in that area, the report said.