ISIS sees asset management consolidation

EUROPE – “Active managers are competing for a smaller share of the pot”, but specialists and large managers will be the winners, says ISIS’s chief executive, Howard Carter.

Speaking at ISIS’s annual general meeting, Carter commented on the toughening markets, where “asset management margins and profitability have collapsed compared with the heady days of three to four years ago”.

“A number of ‘owners’ now appear to be looking to exit the investment management business, in some cases reversing strategic decisions to acquire made only several years ago,” said Carter.

Currently there are around 1,000 managers in Europe with relatively little concentration at the top, and Carter believes this market will mature like that of investment banking in the 1980s and 1990s. During this process, it is the niche players, who are specialists, and the larger managers, who can extract economies of scale, that will succeed.

Carter believes there are a number of external factors strongly supportive of building a successful franchise in asset management, particularly within the UK. There are: several years before the baby boom generation reaches retirement age; growing levels of inherited wealth in the UK; and the need for more company pensions to address contribution levels.

“The result of these forces, along with government recognition of the need for a healthy private savings industry, should be to increase inflows into financial assets,” explains Carter.

ISIS Asset Management today reported a decrease in funds under management over the first quarter. Total funds under management at March 31 were 58.5 billion pounds, from 60.1 billion pounds at the end of 2002. The decrease came from institutional client products, investment trusts, and life and pensions products.

Commented Carter: “Good investment performance will be crucial for all active investment managers, especially in a lower return world. Under the new chief investment officer, Robert Talbut, the equity investment process has been reviewed and structural changes have been made.” Going forward, it is ISIS’s strategy to become one of the larger managers.

ISIS Asset Management was formed by the merger of Friends Ivory & Sime and Royal & SunAlliance Investments.

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