August 23, 2021

Monday Morning Memo: Is There a Wider Consolidation Ahead in the European Fund Industry?

by Detlef Glow.

With the announcement of the purchase of NN Investment Partners (NNIP) by Goldman Sachs Asset Management (GSAM), we witnessed another remarkable merger between asset managers in Europe after Amundi announced that it will buy Lyxor earlier this year. From my point of view, this kind of corporate action is normal in an industry where size matters.

I predict that we will see a number of medium-sized asset managers getting snapped up by larger groups or doing mergers of equals to reach higher levels of assets under management and to secure (exclusive) access to new customer groups via strategic distribution agreements. 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.

With regard to the above, I expect even more mergers in the asset management industry since other asset managers have already stated their interest in buying competitors to increase their market share and to protect their customer access. In addition, I assume that asset managers will also buy technology companies (fintechs) to modernize their digital infrastructure and/or to upgrade their service offering to retain existing clients and/or attract new clients. One example for this might be the takeover of the UK-based digital wealth management company (roboadvisor) Nutmeg by JPMorgan Chase in June 2021.

The increasing corporate activity with regard to mergers and acquisitions is not limited to asset managers only—we also see a high activity 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.

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. At the same time, we will see the launch of new asset management companies which will have already implemented state-of-the-art technologies to administrate and manage portfolios, as well as to service their customers. These new companies will keep the competition in the European asset management industry up and will drive innovation for products and services.

Refinitiv Lipper delivers data on more than 330,000 collective investments in 113 countries. Find out more.

The views expressed are the views of the author and not necessarily those of Refinitiv. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.

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