It wouldn’t have been hard to guess the theme dominating the concerns of CEOs from Europe’s leading asset management houses over the last year, but seeing it in black and white (pages 2-9) brings it home that much more firmly. Current equity market conditions, of course, are stretching the minds of Europe’s top strategic business planners, according to responses to our special IPE CEO survey this year.
And the major tasks ahead, explain the responding executives, range from the holistic restoration of investor faith in equities as an asset class, to the spade-work necessary for the industry to show that it can deliver through the leaner times and not just live on the surfeit of an extraordinary, but all too quickly, forgotten bull market.
Above all, however, our CEOs note that active managers have never been under the spotlight so much to deliver.
How can they adapt to their clients’ needs in terms of risk and return promises and, moreover, how can they ensure that they perform?
The challenge appears all the more intense with many CEOs citing the prospect of increased competition in the shape of small, focused boutiques - happy to deal in smaller amounts of assets, yet cumulatively a real threat to the bottom line of active fund management giants in these times. Is big really still beautiful today?
And how can fund managers address areas such as absolute return, corporate governance and SRI – the topics that are making the headlines.
Furthermore, will the industry change significantly as guaranteed products continue to rise in interest amongst increasingly risk-averse institutional investors?
These and more questions are exercising CEO minds, but the bottom line is that most are focused on the bottom line!
With profitability at stake and the possibility of more cross-border consolidation if returns get hit any harder, the challenge for today’s asset management chiefs appears to be to find the balance in keeping costs down while ensuring that clients and business prospects are happy.
To this end, a number of CEOs mention that the whole business model for asset managers may be on the drawing board. Could that mean further ‘downsizing’, more job losses and a re-evaluation of core businesses?
The other question is just where does the growth lie?
In Europe is it in the more developed markets such as the UK and the Netherlands, as some CEOs believe, or has the time finally come when the Italian and German pensions markets start to flourish, as others opine? Perhaps the central European markets will begin to develop apace as a result of euro membership, as some suggest.
And what hope the US and Asia, where some predict continued business opportunities in the coming year?
There are few CEOs in our survey who don’t cite an improvement in client servicing and product solutions as their target for the coming year – it remains to be seen who can achieve this!
What is certain is that 2002/2003 has been a difficult period.
In last year’s report we highlighted the fact that managers active in the European asset management industry held total assets worth a staggering e24trn.
That figure is of course down this year by almost e1.5trn to approximately e22.6trn.
The net result is that many houses will have seen their asset bases shrink over the course of the last 12 months.
Interestingly though in a year with little in the way of M&A activity that might boost managers’ positions in the rankings there has still been significant movement amongst asset managers in the top 10.
While German giant, Allianz Dresdner Asset Management, retains its place at the head of the list with Fidelity remaining in second place, last year’s third placed manager Barclays Global Investors has dropped off a couple of places to fifth slot – a reflection perhaps of quieter markets for predominantly index houses over the last 12 months, with Vanguard too dropping down from fifth place last year to seventh spot in 2003.
State Street Global Advisors, however, remained in the ascendancy rising from fourth to third place, as did Deutsche Asset Management, which climbed from seventh to fourth spot and Mellon Global Investments up from ninth to sixth.
On the reverse side, JP Morgan Fleming Asset Management slipped back from sixth to ninth, while Merrill Lynch dropped out of the top ten global managers falling back one spot to number 11. Capital International remained stable keeping the number eight position.
These findings, amongst others, underline why we believe the IPE survey of European Asset Management Leaders is so relevant to today’s marketplace.
IPE endeavours to get the most accurate figures in a business where such information is not always easy to come by. To have this data to hand we believe is invaluable to the readership of IPE and to the wider European pensions and investment industry.
Above and beyond that, who isn’t curious in this industry to see just who manages how much and how that places them against their peers in the European fund management arena?
For the second year in succession then we present you with the IPE report on Europe’s Asset Management Leaders.
For 2003, the focus of the survey has become more continental European, with a greater number of domestic European houses included in the survey.
Undoubtedly there will be cases of double counting amongst asset managers and their subsidiaries – such is the nature of the industry. But we think these figures are amongst the most accurate available today.
It remains to be seen now just which asset managers can deliver on the predictions of their CEOs and who will be where next year.
Will the pan-European pensions directive begin to have an impact on cross-border sales by the time the 2004 survey comes around? Will we still be feeling the drag of bear market conditions in a year’s time. Who will be the asset management winners and losers? One thing that never changes is that there is everything to play for!