Andreas Utermann, chief executive officer of Allianz Global Investors, has said asset managers with vertically integrated business models are more likely to struggle than those with a single-focus ethos due to cultural and financial challenges.
Speaking at the launch of the firm's Staying Active: How to Regain Trust in Active Management report, Utermann said there are three types of models an asset manager can adopt to be successful: technology-led, distribution-led and investment-led.
While these approaches can be successful on their own, he explained, around 85% of asset management firms are a hybrid of all three, which can create issues in the current climate of a weak economy and concerns around fees.
"Culture is one challenge," he said. "Tech-minded people will have a very different culture to investment specialists and those in distribution, which can cause problems. Likewise, the financial engineering of these models is very different.
"A technology-focused firm will have a much lower cost-to-income ratio than an investment or distribution model - so which area should a CEO focus on? How can they effectively optimise the financials of a hybrid firm?"
Utermann said firms must decide as soon as possible "what they want to be when they grow up" or risk struggling or even being consolidated away in the next ten years.
However, Utermann, who describes AllianzGI as a purely active investment-focused business, said the reality is the pace of mergers will continue; over the last 15 to 20 years, the share of assets under management and profits of the biggest firms has soared as a result.
The CEO highlighted that AllianzGI has only been involved in acquisitions and joint ventures in recent years including tie-ups with Rogge Global Partners in 2016 and Allianz Capital Partners in 2018, but did not rule out the idea of a merger.
Utermann added: "Today our revenues are over €600m, which tells us we are doing something right. If they were around €300m - which would have been fine in 2012 - we would be out of business.
"In the same way, that number will probably need to be around €1bn five years from now, whether that can be achieved organically or through a large-scale merger.
"Our M&A strategy has always been through bolt-on acquisitions, but we will continue to look at all opportunities presented in the market," he said.
When asked about rumours that emerged last month about a merger between AllianzGI and DWS Group, the asset management arm of Deutsche Bank, the CEO declined to give a comment.
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