Recent years have seen a flurry of mega-deals in the asset management world. With capital market reforms known as MiFID II coming into force deal activity is likely to continue. Consolidation is being seen at all market levels and in a range of forms from mergers through bolt on acquisitions to intra-group reorganisations.
According to specialist international law firm, White & Case, there are three key reasons for the consolidation drive in fund management.
Keeping step with compliance
The financial crisis prompted a wave of regulation in asset management. MifID II and the General Data Protection Regulation will increase the volume of regulation for asset managers to manage. At the same time the UK’s Financial Conduct Authority has clamped down on commission-based fee structures and the charge of dealing commissions for research, so further squeezing fee revenue. As more resources are needed to ensure compliance M&A makes sense for achieving synergies and attempting to gain economies of scale.
The ascent of alternative assets
As customers become more demanding they are no longer satisfied with single strategy products restricted to a handful of geographies. They want access to developed and emerging markets and there is appetite for exposure to alternative assets like property, infrastructure and private equity in addition to traditional bonds and equities. More deal activity is anticipated as asset managers turn themselves into one-stop shops offering investors exposure to a variety of strategies across a range of geographies.
The robot revolution
Robo-advisers have disrupted the asset management model, providing cheap, diversified portfolios based on client risk profiles which can be managed online. Particularly popular with younger investors, traditional managers have to be fleet of foot to keep up with the pace of change.
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