Although most pension funds prefer independently owned managers, only 6 percent of respondents report that a merger recently caused major disruption at their money management firms, according to this month's Pensionforum. More than 38 percent report that between three and five money managers were involved in a merger or acquisition in the past 18 months. But the largest group, 42 percent, indicate no major disruptions following the transaction.
Most plans, some 62 percent, believe that industry consolidation will continue at the present pace. Considering the flurry of activity in the past year, it may be difficult to imagine that the pace could possibly increase, but 15 percent say they think it will.
Mergers routinely generate scrutiny from plans concerned about a potential impact on their money managers. Loss of key investment staff is the primary worry, according to almost 30 percent of respondents. And while all but 17 percent of plans surveyed indicated having at least one manager involved in a transaction in the past 18 months, a clear majority, 77 percent, have not fired a manager because of events linked to new ownership.
At the end of the day, are mergers good or bad news for plan sponsors? A slight majority of all respondents, 54 percent, say they have not yet seen a money management transaction that has turned out to be beneficial to the client, but the rest say they have.
How many of your money managers have been involved in a merger or acquisition in the past 18 months?
None
16.5%
One
18.3
Two
24.3
Three to five
38.3
Six or more
2.6
Which statement best describes your view on a manager that has gone through an acquisition during that time?
No major disruption
42.3%
No major disruption;manager under review
29.8
Some disruption; manager under review
22.1
Major disruption; manager under review
1.0
Major disruption; manager terminated
4.8
Do you think industry consolidation will:
Continue at the present pace?
61.5%
Slow down?
23.9
Increase?
14.5
What is the primary concern following news of a merger or acquisition?
Loss of key investment staff
29.3%
Detrimental change in culture
4.3
Detrimental change in investment process
6.9
Focus away from pension business
4.3
Overall drag on performance
1.7
A combination of two or more
52.6
Other
0.9
How many managers have you put under review in the past 18 months partly or wholly because of events linked to new ownership?
None
46.6%
One
21.6
Two
20.7
Three
6.9
More than three
4.3
How many managers have you fired in the past 18 months partly or wholly because of events linked to new ownership?
None
76.9%
One
20.5
Two
2.6
Three
0.0
More than three
0.0
How many managers have you fired in the past five years partly or wholly because of events linked to new ownership?
None
58.1%
One
22.2
Two
14.5
Three to five
5.1
More than five
0.0
When you evaluate a money manager, how important is independence and employee ownership?
Not important
15.8%
Somewhat important
68.4
Extremely important
15.8
All things being equal, what kind of manager do you prefer to hire?
Independent, employee-owned
86.1%
Subsidiary of larger organizations
13.9
Have you ever seen a money management merger that has turned out to be beneficial to the client?
No
53.8%
Yes
46.2
