Pesky start-ups, higher costs and weaker markets have left bulked-up money managers searching for growth opportunities.
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Pesky start-ups, higher costs and weaker markets have left
bulked-up money managers searching for growth
By David Lanchner
Institutional Investor Magazine
For the complete Euro 100 ranking results, please go to the
rankings section of this site.
So much for the logic of consolidation.
After several years of poor performance in its value-oriented
portfolios of stocks and bonds, Swiss money manager UBS saw new
money inflows fall and profits decline by 26 percent in 1999.
Europe's largest investment firm has also had to contend with
wrenching change as it tries to bring London-based Phillips
& Drew and Chicago-based Brinson Partners under its own
brand. Tony Dye, who headed Phillips & Drew, and Gary
Brinson, founder and head of Chicago-based Brinson Partners,
resigned under pressure in March, leaving chief executive Peter
Wuffli to integrate the UBS subsidiaries.
"We suffered from some short-term performance issues last
year," says Wuffli. "Even though our value portfolios are now
doing well, we decided to strengthen our global research
platform and expand the range of our investment products. Now
we can offer clients nearly any kind of portfolio they
Like many of its global counterparts, UBS finds itself in a
bind. As it spends freely to create a unified brand name and
deliver the products and services demanded by a diverse,
worldwide customer base, the money management firm is also
competing in a slower-growth, fee-conscious marketplace. And a
new generation of index funds, private equity investors and
hedge players are all vying to claim their own piece of turf.
Then there is talent. Keeping star portfolio managers and their
teams together is increasingly expensive as opportunities open
at rival firms and start-ups. In the background, the world's
running bull market is quickly losing speed and threatening to
turn the financial services marketplace into a war of
"Everyone wants a piece of the European market, largely because
of future prospects for the introduction of pension funds,"
notes Stephen Wilshire, head of European research at pension
consulting firm Frank Russell Co. in London. "But with the
exception of the U.K., Holland and Switzerland, there are still
no real pension funds to speak of in Europe. The pie is quite
small, and the appetite of fund managers is quite large. Until
these markets start diverting assets into funded pension
schemes, competition will be a continuous downward force on
The lack of major new growth opportunities is starting to
manifest itself in the Euro 100, Institutional Investor's
ranking of the largest money managers. While the minimum amount
of assets needed to break into Europe's top five rose sharply
last year, to E649 billion ($545 billion), the growth rate
isn't quite what it seems. (II has, for the first time, used
the euro, rather than the U.S. dollar, as the basis for the
ranking. Because of the decline in the euro and ongoing shifts
in the currency makeup of managers' portfolios, only
generalized year-to-year comparisons here and elsewhere in this
article are possible.) Without fifth-ranked Deutsche Asset
Management's absorption of Bankers Trust Corp.'s investment
unit, the minimum to join this elite group last year would have
risen much more modestly. Aside from UBS (E1.09 trillion) at
the No. 1 spot and Deutsche Bank in fifth (E649 billion), the
top tier includes Axa Group (E781 billion), Barclays Global
Investors (E779 billion) and Credit Suisse Group (E735 billion)
in the second, third and fourth spots, respectively.