Frankfurt venue for first congress
The first European Asset Management Congress was held in Frankfurt at the end of March. It was almost totally under the shadow of the merger of the two dominant local banking players who were locked in discussions, the outcome of which would utterly transform not just the local and national landscape, but also impact the European and global one.
The topic of Dresdner-Deutsche dominated conversations in the coffee intervals, the meal breaks and the evening drinks. The spacious and well appointed foyers of the Frankfurt Messe congress buildings were abuzz with the latest speculations about the event that was simultaneously awe inspiring and fear engendering. Love or loathe the merger, there was no getting away from it, this was a momentous deal and these were momentous times and Frankfurt was where it was happening. The evolution of the world’s largest bank from among the local species had to be recognised as Frankfurt’s coup, not just of the year, but perhaps of the decade, as who could tell where things would go from here.
This merger was resonating in the public’s psyche as well as that of the financial industry. Even the taxi-drivers were less than laconic about the doings of ‘the German bank’, as they obligingly translate for outsiders. Everyone deriving a living in the city was going to be affected some way or another, which was one explanation given for the fact that over 700 people made their way to the Congress Center, the vast bulk of them locals.
With a literal decimation of the city’s financial sector workforce being predicted, for some it was essential to be seen there, and perhaps to catch the eye of the prowling head-hunters; for others it was a question of picking up the latest whispers. For competitors there was much to learn as to how the new market conditions could shape up for them.
So, there was a vulnerability about the financial centre of Frankfurt. A sword seemed to be hanging on a thread over the financial community at that point – without any inkling that it could be hanging over the deal itself. Yes, there were conundrums a-plenty about the new ‘green bank’, with Allianz seen as having carried off the victor’s trophy in terms of the Deutche’s hyper successful investment funds business DWS. Any external problems, such as the London Kleinwort investment banking business, looked capable of being easily resolvable in the grand scheme of things. It was the size of the transaction, the scale of the thinking behind it that made it look unsinkable, just as the Titanic did – before the event. That the government had more or less pre-ordained such transactions by unlocking the tax brake on disposals of cross holdings was regarded as perhaps the most unlikely part of the whole scenario. Even the socialists and greens seemed to be backing the advent of the commercial financial juggernauts.
That was outside the auditorium where all the first day’s sessions were held and the 35 workshops of the second day were scheduled for a range of rooms, carved out of the flexible space of the congress building.
But even inside, the merger found itself on the agenda, even though the programme had been put together by organisers Maleki group months before. In particular, the workshop on ‘Mergers and acquisitions and integration in the asset management industry’, sponsored by Deutsche Asset Management and conducted by one of its executives, Axel Wieandt, was robustly and impressively run as a question and answer session on the merger, after some introductory comments on industry trends. There are few places outside Germany where you could find such the exchange between an audience and a speaker about a topic of high local concern conducted in a foreign language. The topic, like most of the discussion over the two days, had been billed as English, that was rigidly adhered to, even though over 95% of the audience must have been locals eager for information from a variety of perspectives.
In retrospect, it is the questions that were put at that session that were more illuminating than the answers – these now seemed irrelevant, which clearly would not have been the case if all had gone according to the plans in the twin peaks: How was the new bank going to distribute its investment products on the retail side; what about the high degree of overlap in services of two banks; wouldn’t customers be lost as in UBS/SBC merger in Switzerland; why lose the value of Dresdner brand name and structure; would the new group be a manager of all styles or form a common style; clients were seeing a concentration of assets they do not like; what about the cultural issues; how was the group going to be global; how would they measure success of integration; how would they get personnel to buy into merger?
Over the two days, there were plenty of other topics discussed that kept the delegates from over 20 countries pretty well in their seats. On the pensions issues panel discussion, Kees van Rees, chairman of the European Federation for Retirement Provision, warned of the hidden liabilities lurking in countries first pillar commitments and their negative impact on monetary policy as things rolled out. “Ageing – we ain’t seen nothing yet,” was one of his comments.
With 90% of pension liabilities within Europe’s ‘pay-as you-go’ systems, he pointed to the urgency of taking political action. At the company level, pensions are a must to recruit and retain staff: “One reason why in the the US we are seeing a trend to defined benefit,” he maintained. From the point of view of multinational operations, the ability to take pensions across borders to follow a mobile workforce meant the tax and regulatory issues had to be tackled.
The chairman of aba, the German pension fund association, Boy-Jürgen Andresen, said that a rapid and sustained growth in company pensions schemes was important, though he recognised that retirement income would always be a mix of state, company and private provision. But a national company supplementary pensions plan for all employees would require a ‘legal mandate’. The basis for this could be a legal obligation to channel a fixed proportion of pay, perhaps 2% into a such a scheme and that this be without any tax or other obligations.
Speaking for the European Asset Management Association, Donald Brydon of AXA Investment Managers, spoke of the need for the industry to have a representative body, as there was no one ensuring their voice was being heard at EU level. Politicians were interested in what the investment industry was doing, he said pointing to socially responsible investment, venture capital and the prudent man questions. While welcoming US players to the market, European groups had to raise their standards to compete with them.
The panel considering new forms of asset management were very concerned with the forces moulding change, such as globalisation, with Edmond Villani of Scudder Kemper Investments distinguishing between a global and a ‘multi-local player’. The internet would drive the business forward with greater transparency and lower transaction cost. Frederich Schmidt of Commerzbank’s asset management division, saw global branding of an organisation being very important. As to new products, State Streets Global Advisors’s John Serhant emphasised exchange traded funds and hedge funds, but pointed out that pension funds had been slow to take to these. The decision by Calpers, the largest US pension plan to become involved in hedge funds had changed the scenario, he said.