Weekly Fund Distribution Notes – 13 May 2025
27th May 2025
Is this the year of truth for active asset management? Likely. M&A in the European asset industry and respective investor / selector takes. Mandate and selector news. The apparent blueprints on how to deal with selectors and some astonishing ESG findings – from both sides of the Atlantic.
Deals done. US-China done. US-UK done. Well, I won’t comment on the deals. There are plenty of thoughtful and less thoughtful comments all over. Markets, however, seem to be happy. Nonetheless, do not assume that the capital rotation out of the US is passé now. Already last week, we quoted the Financial Times’ Katie Martin as saying that “big institutional investors are not flinty fast-moving hedge funds or retail funds. They are vast supertankers that move slowly, and methodically, but make big waves. Tilting their balance towards Europe and Asia and away from more familiar ground in the US, even just a little, marks a huge re-engineering of global markets. For many, the US has become a riskier bet.”
With the article “Selling of dollar assets signals start of longer-term shift, warn investors” the FT provided another interesting follow-up on the story. Although we expect the capital rotation to last and potentially to gain pace this year, it does not mean that US exposure will be massively slashed at all. The US is still home to ample leadership (company / sector level) and opportunities.
Anyway, these are certainly fascinating times. “This is the year of truth for active asset management. If you can’t find ways to differentiate in this environment – marked by dispersion, divergence, and structural change – then when can you?” stated the DWS chief executive, Stefan Hoops, in the FT on Sunday. We fully agree with this statement, but must also add that in the last 2-3 years, there have always been active funds and active only asset managers garnering impressive assets (in spite of the alleged passive dominance).
Coming back to the FT Stefan Hoops interview, he also stated that volatility would likely drive dealmaking among asset managers. “I feel that the current market behaviour will simply force consolidation, and not by choice … which would be interesting.” In this context, Morningstar’s study “Consolidation in the European Asset Management Industry,” published last week, got broad media coverage. Interestingly, the main observations are almost identical to the findings from our “M&A in Asset Management White Paper”, published back in 2017, the heyday year in European asset management M&A.
“Poor” planning and a lack of cultural alignment can turn these transactions into failures. Also, “the challenge of cultural integration, and the often lengthy timelines required to complete transactions, helps explain why, despite recurring industry predictions of accelerated consolidation, the actual pace has remained measured and opportunistic.” Ignites Europe quoted Monika Calay, director of UK manager research at Morningstar, as saying that ”these challenges frequently distract senior leaders and investment staff from their primary responsibility of generating returns for clients and fundholders.” See also our chart of the week below – from 2017 – on respective selectors takes.
What’s the news from the buy-side? The Italian pension fund Fondo Telemaco has undergone a significant reallocation of mandates, retaining only BlackRock while replacing several asset managers. The updated mandate now includes Generali, Amundi, BNY Mellon, Neuberger Berman, RBC BlueBay, Anima, Groupama and Northern Trust.
Citywire Selector featured a “blueprint series” on “how to communicate to selectors in a crisis”, “selectors want fund groups to be partners, but what does that mean?” and “the dos and don’ts of manager access.” The video series provides some valuable insights, but naturally only touches the surface. Let’s talk if you would like to dive deeper into this.
Germany’s Union Investment released its latest ESG study, having surveyed 179 institutional investors with combined assets of EUR 2.4 trillion. The study found that respondents “remain committed to investing sustainably”, with almost 90% taking sustainability in investment decisions into account, representing a 4% rise versus last year’s survey. However, it should also be mentioned that 67% consider the current regulatory framework for sustainable investing as too complex and would welcome a simplification.
As addressed many times during the last couple of months, ESG is far from being dead. Interestingly, even in the US, Reuters’ “Sustainability Reporting USA 2025” highlighted that, in spite of the ESG backlash, sustainability reporting remains a standard practice among major US businesses, with 99% of the top 100 companies publishing reports and 88% securing third-party assurance.
