AM M&A hurting competition and investor choice - NCI paper

Jonathan Boyd
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AM M&A hurting competition and investor choice - NCI paper

A report published by asset management think tank New City Initiative (NCI) suggests that competition in the asset management industry and investor choice is being undermined by ongoing levels of mergers and acquisitions, which are "strangling boutiques".

The report looks the ongoing drivers of M&A in the industry, and asks whether particular action needs to be taken at either government or regulatory levels to ensure competition and investor choice are maintained.

Research conducted for the findings also involved speaking to boutique asset managers about the impact that consolidation is having ongoing. The report cites Mercer figures suggesting volume and deal count in 2018 were the highest since 2009, as the industry reacted to reallocation of funds into cheaper passive products at a time of rising costs and shrinking margins linked to developments such as AIFMD, Mifid II, Emir, Ucits V, GDPR and Priips.

In markets such as the UK, there has been pressure to merge to deal with cost increases in the ditribution space, and access larger pools of capital.

However, the report warns that there is no correlation between size and performance; but if anything, the bigger the funds, the more challenging it becomes to eke out performance, while access to niche investment areas is further curtailed.

Jamie Carter, chairman of New City Initiative, said: "It is clear there is widespread concern among our members that continued consolidation in the asset management industry will force investors to allocate into only the largest, dominant asset managers - ultimately depriving them of choice and potentially even returns. If the UK is to have a competitive asset management industry moving forward, NCI strongly recommends that a more proportionate approach to regulation would be a good starting point to enable boutique managers to flourish alongside their larger peers."

NCI counts some 45 independent AMs from the UK and the Continent among its backers, which represent some £500bn (€548bn) in assets. Full details are available at https://www.newcityinitiative.org/

The full report - M&A in Asset Management: Is it strangling boutiques? - can be accessed by clicking here the pdf link below:

Jonathan Boyd
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Jonathan Boyd

Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope.