Merger and acquisition activities prompt sharp rise in figures Hugh Wheelan reports
Global pension fund managers are expanding at an unprecedented rate, with institutional assets under management among the top five firms now on a par with the combined GDP of France and the UK, according to 1998’s guide to European Pension Fund Managers by consultants William M Mercer.
And around a quarter of the 173 fund managers in the study were involved in merger and acquisition activity over the year to June 1998, with almost half involving UK firms. This pushed the number of groups with assets under management of more than $100bn to a record high of 35 from 22 in 1997.
Combined assets managed by these top 35 firms have also risen by a third from $6.1trn to $8.2trn, nearly as large as the GDP of the US.
There were also more cross-border and cross-segment deals than ever before, involving over two-thirds of the managers in the study.
Julia Hobart, head of manager advisory services at Mercer and editor of the guide in London, comments: “Our research shows that the size of investment management organisations is rapidly growing, although this is not too surprising given the huge number of new amalgamations in the industry.
“The markets have continued to be very bullish and we have seen between 15-20% growth in the year, with underlying assets booming even more.
“Some of this is organic, some market growth, but a good portion is down to the M&A intensity over the last year, although notably, none of the top five groups in order of size - Fidelity, Barclays Global Investors (BGI), State Street Global Advisors (SSgA), Capital International and CDC Asset Management, were involved in any merger deals.” These top five managers in global terms are the same which topped the table in 1998, although there have been position changes, with CDC slipping from third to fifth and SSgA and Capital International leapfrogging to third and fourth places respectively.
Significantly, the average number of offices per firm has also risen from 2.4 to 2.7, and 35 firms (20%) now operate out of five or more countries compared with just 25 (14%) a year ago.
Furthermore, fund managers reported an average growth of 57% in the number of investment professionals employed.
Hobart adds: “Behind this corporate activity is the drive to globalise and achieve the ‘international standard’. However, one shouldn’t underestimate the task of bringing together different groups of talented and marketable individuals and the significant effect this has on a company’s cost base. It is also interesting to see the change in managers’ organisational structures, especially outside their home base. Traditionally, foreign offices were set up primarily for marketing and client service, with fund management retained in the home country.
“We are now seeing a clear decentralisation of fund management and research activities as evidenced by the three fold increase in these professionals employed locally.”
European fund managers are also growing impressively in the US, where they have increased pension fund assets by over 20% during 1997-1998.
The survey is based on statistics collected as at 30 June 1998 and details are available from Diane Alalouf at William M Mercer on: +44 171 963 3168).

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