Investment managers may have licked their lips at the expectation of European banks selling assets at knock-down prices in the face of various regulatory and business pressures since the crisis. But senior managers at Credit Suisse say the "deluge" they counted on soon will largely fail to materialise.
Investment managers may have licked their lips at the expectation of European banks selling assets at knock-down prices in the face of various regulatory and business pressures since the crisis. But senior managers at Credit Suisse say the “deluge” they counted on soon will largely fail to materialise.
And even when heavier selling eventuates, asset manager-buyers will face various other pressures, they say.
These include competition for the assets themselves, potentially tighter regulation on risk-taking as ‘shadow banks’, and possibly also unrealistic expectations from some clients of the returns achievable from the assets.
The forecasts are not great news for expectant asset managers, including hedge and private equity firms on both sides of the Atlantic. In expectation, much money had flowed into London expecting a “deluge of assets” to buy, says the head of the UK strategic bank solutions team at Credit Suisse, Tahir Wahid.
It is now with insurance companies, hedge fund managers, private equity and sovereign wealth funds, among others. But Wahid said the deluge of assets to spend it on “in reality will not happen”.
Bob Parker (pictured), senior advisor, asset management, at Credit Suisse, acknowledges Europe’s banks may ultimately sell off up to €3trn of balance sheet assets.
But he says the selling of some loans, for example, where hedge funds are natural buyers, might not come for a year or two.
“It will be a long, drawn-out process, because there is a spread between bids and offers. We still have a year or two before we see more transactions coming out, because there is a gap in the pricing at the moment.”
Even when Europe’s banks start selling more heavily, Parker says asset managers and hedge funds will face stiff competition from private equity, sovereign wealth, pension and insurance funds.