Asset Management: The Winners & The Losers

Contributing Editor

25 April 2005

The global asset management sector is experiencing rapid change with specialist providers gaining increasing ground, according to research published by Morgan Stanley. One of the major beneficiaries of these changes is UBS’ wealth management business, said the research. Specialist fund management groups such as passive asset managers, what Morgan Stanley’s research calls "quantitative houses" and alternative asset management, mainly hedge funds, are increasingly the winners in asset management, argues the US investment bank. These groups have been very successful in gathering net new money and generating strong profits. Quantitative specialists like Barclays Global Investors are encroaching into active management and doing well in the process. They now manage an estimated $4 trillion of assets globally, according to the research. At the other end of the spectrum, hedge funds have been extremely successful in mopping up assets. The top 50 hedge fund of funds grew assets 45 per cent in 2004 and hedge funds now manage around $1 trillion in assets, according to Morgan Stanley. Morgan Stanley believes the asset managers who stand out as the winners in fund management in terms of net new money, profitability, gross margins and investment performance include the following:

Barclays Global Investors. BGI saw an 11 per cent growth in net new money in 2004 and a growing proportion of inflows into higher margin “active” strategies.

Schroders. Schroders retail fund business is booming, particularly in Europe and Asia. The firm’s retail business enjoyed a 27 per cent growth in net new money. Margins and profitability are also strong.

Julius Baer. But this is all on its institutional business, which saw a 31 per cent rise in net new money in 2004.

Societe Generale. The research highlighted strong growth in both its asset management and private banking businesses. Net new money grew by 9 per cent in asset management and private banking. Lyxor, the structuring business of SocGen also saw strong AUM growth.

Man Group. The London-based hedge fund specialist is one of the most profitable asset mangers. However, hedge fund inflows have slowed in recent months, with private client inflows slowing from a 32 per cent growth rate in the group’s fiscal first half 2004 (up until end-March), to 15 per cent in the first quarter of 2005.

UBS. The Swiss bank’s impressive wealth management asset gathering business was highlighted by the research.

The report also highlighted what it categorized as the losers in global fund management world, these included:

Amvescap. The research shows how performance issues and regulatory difficulties has ensured that no new money has flown into the asset manager for more than three years.
Deutsche Asset Management. Despite strong performance at Deutsche’s retail business DWS, the European institutional business has had performance issues, says Morgan Stanley.
Henderson. The UK asset manger is seeing continued redemptions from a closed life insurance book, institutional mandates and investment trusts.
F&C Asset Management. The London-based asset manager has experienced redemptions in the second half of 2004, partly as a result of the merger with ISIS Asset Management in October. But performance problems have also dogged the group.