The announcement of the integration of the asset management business of the Italian insurance group Generali with the French investment bank Natixis into a new investment firm, in which each group will hold 50% of the capital, comes shortly after another giant French financial institution, BNP Paribas, confirmed earlier this year the purchase of the management company of AXA, another of the leaders in the fund investment business, for 5.1 billion euros.
These mergers and acquisitions operations between large investment groups are just the beginning of a process that has only just begun in the Old Continent. European asset management firms need to get much bigger to face global competition from large North American conglomerates, in an environment where passive management is gaining more and more ground among investors’ preferences, due to its low cost and greater transparencywhich leaves less income margin for managers with a traditional business.
In the latest report prepared by the Thinking Ahead Institute, from the Willis Towers Watson (WTW) consulting firm, on the 500 largest asset managers in the world by asset volume, among the twenty largest firms, only four asset managers are European: Allianz, Amundi, BNP Paribas and Natixis, taking into account that the Swiss bank UBS and the British Legal & General also appear in this group.
And among the ten largest managers, there are only Allianz and Amundi, in ninth and tenth position, respectively, in the ranking, behind BlackRock, which dominates the world market, with more than 11 trillion dollars in assets under management, and Vanguard. , another of the global leaders in passive management, which manages ten billion dollars.
To put these figures in context, Allianz managed only 2.5 trillion dollars, taking into account that its subsidiary Pimco, founded by the legendary manager Bill Gross and one of the great references in the management of fixed income assets, controlled two trillion at the end of 2023, the year from which WTW takes the data, while Amundi closed last year with just over two billion dollars.
Rise of passive management
All investment firms, including European ones, have launched a desperate race to gain market share in the world of passive management and in unlisted asset markets, where they can compensate the reduced prices of passive funds with the higher commissions applied in mutual funds. private equityprivate debt, infrastructure or real estate.
In this area, Europe is far behind its North American competitors. A single piece of information explains this delay: last year European ETFs achieved net flows worth 247 billion euros (almost double what they achieved in 2023), which raised their assets to 2.18 trillion euros, a 33% more. But the big beneficiary of this boom in passive products is BlackRock, the North American giant, which controls almost half of this volume, with a 44.2% market share, according to Morningstar data.
The rise of passive management is not a new phenomenon. In the United States it has been gaining ground for decades and has already surpassed active wealth management. The technological development of the last decade has facilitated access for a growing number of investors who have seen in the North American stock market a new El Dorado of eternal revaluation, driven by the great technological values represented by the Magnificent Seven (Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta and Tesla).
Of the total volume in European ETFs, 72% are equitiesand the vast majority are accumulated in the US and global stock markets, where due to the composition of the indices, North American companies also monopolize a large part of the assets.
And although passive management only represents 13% of the total invested in investment funds, the European investment industry is at the crossroads of adapting to a new environment where gaining size has become crucial to compete globally to face the costs of transformation of a business where technology has burst with force. In fact, the distribution capacity of new actors, such as neobanks or digital platforms, also forces us to reinvent ourselves at a time when we can no longer survive solely on the sale of products with little added value.
European regulations
The European regulations themselves, pending approval in Brussels, push in this direction, with the prohibition for the moment of retrocessions in the distribution of investment funds if it has not been carried out with advice and the need for firms to demonstrate precisely the value added value they offer to investors compared to passive management, which is known as value for money.
At the moment, the operations of BNP Paribas with AXA IM and that of Generali with Natixis have been known. But they probably will not be the only ones that will occur, in an environment where even Mario Draghi’s report prepared for the European Commission, presented last year, highlights the need to energize the EU capital market with the collaboration of fund managers to direct capital flows towards the most strategic sectors in Europe in a world where new paradigms have emerged after Donald Trump’s victory in the United States.
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