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European Fund Manager M&A to Continue

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Asset managers will continue to buy rivals in Europe in order to increase scale, but they will also acquire fintechs and service providers to the industry.

Detlef Glow, head of EMEA research at Refinitiv Lipper, predicted in a report that medium-sized asset managers will get purchased by larger groups or transact mergers of equals to reach higher levels of assets under management and secure exclusive access to new customer groups via strategic distribution agreements.

Glow said: “Higher assets under management may also help the respective asset manager to maintain its revenue since the pressure on margins in the asset management industry is increasing and will continue to do so in the future.”

On August 19 Goldman Sachs announced the acquisition of NN Investment Partners, a Dutch asset manager, from NN Group N.V. for €1.6bn ($1.9bn).

Goldman Sachs  has $2.3 trillion in assets under supervision globally, and this transaction will bring assets under supervision in Europe to more than  $600bn. The bank said NN IP is complementary to its existing asset management footprint in Europe and will add new capabilities and accelerate growth in products such as European equity and investment grade credit, sustainable and impact equity, and green bonds.

Amundi announced on 7 April that it was in exclusive negotiations with Société Générale to buy Lyxor, the French bank’s exchange-traded fund business, for €825m.

The French asset manager said in a statement that the deal would make it the European leader in ETFs, with €142bn in combined assets under management, a 14% market share in the region and a diversified profile in terms of client base and geography.

The statement added: “Amundi would benefit from strong levers to accelerate its development on the fast-growing ETF segment, while complementing its offering in active management, in particular in liquid alternative assets and advisory solutions.”

Asoka Wöhrmann, chief executive of DWS, said on the second quarter results call in July that the asset manager wants to be part of the consolidation that is going to happen in Europe.

 Asoka Woehrmann, DWS

Wöhrmann said: “Very clear for us, it must pay out along our phase two strategy and it must pay to our narrative we have placed very clearly and it must also pay out to our culture we have in the organisation.”

He continued that criteria for a transaction include enriching DWS’ platform and being complementary to existing capabilities, local footprint and customer base; being a cultural fit and increasing shareholder value.

“I think it’s important that we have to look with the lens of ESG and how high-margin strategies can be a part of these M&A views,” added Wöhrmann. “This is very important but pure size is not, as we always said, not the only view we are putting for M&A.”

Fintechs

Glow also expects asset managers to buy fintechs to modernize their digital infrastructure and/or to upgrade their service offering to retain existing clients and/or attract new clients.

For example, JPMorgan Chase said in June it was acquiring Nutmeg Saving and Investment Limited (Nutmeg), subject to regulatory approval. The bank said Nutmeg is one of the U.K.’s leading independent digital wealth managers and will complement the digital bank that is planned for launch in the U.K. later this year under the Chase brand.

Sanoke Viswanathan, chief executive of International consumer at JPMorgan Chase, said in a statement: “We are building Chase in the U.K. from scratch using the very latest technology and putting the customer’s experience at the heart of our offering, principles that Nutmeg shares with us.”

Glow expects new asset management companies to launch who will have state-of-the-art technologies to administrate and manage portfolios, as well as to service their customers.

 Detlef Glow, Lipper

“These new companies will keep the competition in the European asset management industry up and will drive innovation for products and services,” he added.

In addition, Glow said there are likely to be deals among service providers for the asset management industry.

“This is also not surprising, as size matters even more in this part of the fund management industry than for the asset managers themselves,” Glow added. “That said, I won’t predict a wider consolidation within the European fund industry, but we will witness more mergers and acquisitions which will lead to a higher concentration of assets under management at all levels of the industry.”