AH, FOR THE GOOD OLD DAYS. Back then -- say, three years ago -- money managers seemed grafted to a glorious growth trajectory. Markets around the world were routinely posting double-digit gains, and countries and companies in Asia, Europe and South America hastened to adopt U.S.-style stock- and bond-market-funded retirement systems. Bullish markets and new clients filled European money managers’ coffers to overflowing. Mutual fund assets nearly doubled, to $3.7 trillion, between 1996 and 2000. And Europe’s typical asset manager posted a nearly 30 percent annual profit margin.
In today’s fallen world, markets are reeling, enthusiasm for pension experiments has waned, and most investors and companies are desperately trying just to hold on to what they’ve got. For Europe’s money managers, new clients are harder to come by, and the one viable growth strategy today is to pick off failing rivals. By at least one industry estimate, fully one third of all European money managers are losing money.
On the following pages, Institutional Investor takes a look at how money managers are struggling to keep up with the changes in their business. More bad news may be in the offing, as Senior Writer Justin Schack warns in “Beat the Clock” (see related story). He notes that U.K. money managers will be hard-pressed to meet a March deadline to demonstrate to the government that they’re not charging pension clients for services they don’t need or use. If they can’t make their case, Parliament is likely to impose reforms.
London-based Senior Editor Andrew Capon examines the efforts of prominent British asset manager Schroders to gamely modernize in the midst of the downturn (" Can Dobson Fix Schroders?”). Will CEO Michael Dobson pull off this cultural as well as commercial transformation, or will the British icon end up in the hands of some huge money management operation? Given the sorry state of the whole industry, he doesn’t have much margin for error.
Finally, in an analysis accompanying our annual ranking of Europe’s biggest asset managers -- “Culture Shock” -- Capon observes that firms not realigning themselves and their staffs to cope with lower revenues are making a big mistake. Investors aren’t likely to dive back in at the first sign of market stability.
