Euro 100
Lulled into a state of complacency by the nonstop gains of the late 1990s, money managers found themselves unprepared for last year's nasty lurch. Returns fell, asset growth slowed, and suddenly, investment management didn't seem like such a sweet business after all.
The good times, it turns out, masked an underlying weakness of many firms: spiraling costs, especially in back office, administration and information technology, that now threaten to further erode profit margins already weakened by the bear market. According to a recent PricewaterhouseCoopers survey, unit costs (stripping out the effects of market gains or losses) for 2000 ended up 10 percent over 1999 and more than 20 percent above the 1998 level.
As a result, operating margins for European money managers fell from 29.2 percent in 1999 to 28.1 percent in 2000. PWC reckons that if the markets remain in the doldrums, margins could fall as low as 15 percent this year. But in light of the even grimmer economic outlook that's emerged after the recent terrorist attacks in New York and Washington, the lower margins may arrive still sooner.
To bolster margins, or at least stave off further declines, money managers are working both sides of the new euro coin, trying to simultaneously reduce costs and boost revenues by attracting net new inflows. Says Heinz Haemmerli, global head of investment funds at UBS Asset Management, "The downturn in markets creates enormous pressure to generate new business."
Overall, the Euro 100 firms saw their total assets under management rise from E12.9 trillion to E15.7 trillion between 1999 and 2000. Every one of the top ten firms saw its totals jump. In many cases, though, the gains came from acquisitions, not organic growth, which is one reason 2001 will almost certainly show significant declines.
To better reflect the pan-European nature of Europe's largest fund managers and more accurately depict the types of assets handled by these firms, Institutional Investor has made a number of changes to its presentation of the Euro 100 this year. We are no longer dividing assets into euro-zone and non-euro-zone designations. The new geographic breakdowns include "European," "U.S." and "Other" (areas outside the U.S. and Europe) for equities and fixed income. In addition, we list cash and equivalents and a miscellaneous category that includes property and alternative investments, among other items.
To complete the ranking, Institutional Investor surveyed more than 200 banks, insurance companies, pension funds, independent fund managers and foreign money management firms with registered offices in Europe. European companies and companies headquartered in Europe (for example, Old Mutual) were asked to report global assets under management. Non-European companies were allowed to report only European-derived (invested domestically or internationally) assets and non-European assets slated for investment in Europe. Senior Associate Editor Tucker Ewing compiled the data from questionnaires completed by the institutions themselves. This information was supported by annual reports, additional reporting and follow-up faxes and telephone calls.
As in past years, the numbers are as comparable as possible given the different accounting practices in Europe. All assets are stated in euros. In some cases, assets at continental European institutions will be higher than reported because their accounting rules require that they value assets at the lower of cost or market value. Currency conversion and rounding mean that not all columns will add up. All information is as of December 31, 2000, unless noted.