Should investors fear or welcome the rise of the fund supergroup?

Pressure on active asset managers

clock • 4 min read

Buyers have warned the creation of more fund powerhouses could lead to reduced competition, performance concerns and capacity issues, although they acknowledge the benefits of economies of scale in areas like fee reductions.

Benefits

However, Investec Wealth and Investment's head of fund research, Andrew Summers argues fund consolidation can benefit end investors, while certain types of products may only be viable at larger firms with greater resources.

"The larger the AUM they run then, in theory, the greater the resources they have to pay for exceptional talent or to be able to keep fees low," he said. 

"To the extent the industry still suffers from too many subscale investment vehicles that are unattractive to investors, consolidation provides an opportunity to create larger pools of assets that are more attractive. 

"However, they should ensure not too much AUM is concentrated in the hands of too few individuals, as this will lead to capacity constraints in these strategies."

Editor's View: The big questions as Aberdeen and Standard Life unveil merger deal

He added deals have to be considered on a case-by-case basis as there is a place for both smaller, boutique managers as well as larger, better resourced mega groups.  "We would be against any trends that disrupted this balance too much in either direction," he added.

Square Mile managing director Richard Romer-Lee also highlighted the benefits of scale, including the ability for asset managers to specialise across a greater number of areas and distribute products more widely.

"Aberdeen and Standard Life's businesses complement each other in terms of their skill-sets. The devil is in the detail but on the surface I can see why it makes sense," he commented. 

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