Standard Life Investment and Aberdeen Asset Management’s planned merger marks the latest tie-up between two leading asset managers, but what knock-on effect will this have for fund selectors?
Speaking in our December magazine, Fidelity’s James Bateman, CIO for multi-asset at the group, said there is likely to be a growing split between mega companies at one end and boutique players at the other.
For Emmanuel Ferry, CIO of Swiss group Banque Paris Bertrand Sturdza, mega-mergers such as Standard Aberdeen make sense for shareholders, while also making sure active managers are well funded as passive strategies become more prevalent.
However, he added: ‘For fund investors, a giant asset manager may be less efficient. Mega mergers are always a signal of toppish market valuation.
'They should favour the emergence of boutique asset managers, niche players with a clear focus and a more entrepreneurial culture,' Ferry said.
Aaron Leitner of Tandem Capital said the increasing trend for mergers among large players helps bring top portfolio managers under the same umbrella, which aids with selection efforts.
‘There is the additional benefit of greater cost effectiveness, caused by the streamlining of operations related teams and systems and eliminating redundancy in sales & marketing teams. All this leading to a reduction of TERs, hence further improving net performance for the investor.’
Bad for boutiques
According to Frank Huttel of German boutique investor FiNet, the mergers will allow for rationalisation in certain sectors, which is hugely positive.
‘It will mean the removal of funds which no longer make sense or sit in over-populated sectors. For example, there are too many European equity funds and closures will improve the offering.’
As with his peers, however, Huttel envisions challenges. ‘The bigger companies could become more and more inflexible and also only focus more closely on their larger investors. This would mean independents, such as ourselves, may be overlooked in terms of service.
‘At a time when boutique companies and boutique fund buyers, as well, as contending with the regulatory challenges of MiFID II, this could create a challenging environment if you are not one of these large players.’
Opposing this view is Davide Alfano of Kaleidoscope Capital said the suggestion that larger players will become inflexible is not necessarily true.
‘In terms of the offering, it is not just a matter of size but also of corporate culture. It is more difficult to achieve, but you can pursue innovation also within big organisations.’
Fabio Catalano of Italian group AcomeA believes the Standard Aberdeen tie-up marks the ‘age of mergers’ and comes at a time when alpha generation and cost effectiveness is being closely scrutinized.
‘This is the answer of the financial industry to 2016, which was one of worst years in the past ten in terms of producing alpha, and one which saw market share lost relative to ETFs. Last year, in the UK alone, only 9% of the manager beat the market, 20% in Europe and 25% in the US.
‘This has led to consistent outflows from asset managers industry but I don’t think fund selectors will be hugely impacted by the mergers. Perhaps some strategies will be consolidated, with the best ones being kept, as well as the best managers.’