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Hawkpoint forecasts a new wave of structural change amongst European Asset Management firms

09 July 2002

Hawkpoint forecasts a new wave of structural change amongst European Asset Management firms.

The annual Hawkpoint report on corporate strategies in European asset management shows that asset management will continue to grow as a core product offering for the major financial institutions in Europe. The conventional wisdom of the 1990s to expand through acquisition is today less valid as fund managers face significant profit erosion.

This has been driven, in the main, by: 

  • Margins being put under intense strain due to inflated cost bases and poorly performing markets
  • An accelerating trend to allow other product providers access to proprietary distribution, known as open architecture. 
  • Locally based asset managers are losing valuable institutional mandates to global players that have historically supported their asset management activities.
  • The result of this is:
  • Many of the firms that aggressively expanded through acquisition have now stalled
  • Asset managers must focus on their relative strengths with a separation of manufacturing and distribution activities
  • management capabilities in order to respond to open architecture and to release capital

These changes are taking place against a backdrop of buoyant corporate activity in the asset management industry:

  • Recently in the UK the asset management operations of Sun Life of Canada, Royal & Sun Alliance and Artemis have been sold and there has been a proposed bid for Edinburgh Fund Managers. In addition, the sale of Commerzbanks Jupiter is pending.
  • There is a new preparedness to seek innovative solutions to meet strategic aims. Successful joint ventures are emerging such as State Street with Mediolanum, Prudential Financial with Banco Populare di Bergamo and Scottish Widows, and Socitt Generale with Frank Russell. Groups are also exploring asset swaps, such as Deutsche's acquisition of Scudder from Zurich Financial Services in exchange for Deutscher Herold, the German life assurer.
  • A growing case is also developing for larger financial services groups to seek a stock market listing for their asset management activities. This not only provides a more direct means to incentivise management but provides a new currency for acquisitions to help preserve scarce capital.

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