Asset managers are increasingly taking an active approach to portfolio management—not for their clients, but for themselves. The blockbuster merger between Aberdeen Asset Management (LON: ADN) and Standard Life (LON: SL) as well as Schroders' (LON: SDR) recent acquisition of Adveq are just two of the deals this year representing a seismic shift.
These intra-industry acquisitions reflect the increasing need for scale and complementary products in the sector. As Aberdeen CEO Martin Gilbert said in a recent Citywire interview: “We’re strong in global and emerging, Standard Life Investments is especially strong in solutions.”
Much of this activity is being expedited as the shadow of the EU’s Markets in Financial Instruments Directive II (Mifid II) looms large. Coming into force next year, the directive brings into law several transparency, commission and investor protection changes that are likely to cost the sector billions of euros. Some asset managers feel it best to fight these changes alongside each other rather than stand alone.
Pressure to diversify and scale also comes from LPs. Historically in Europe, LP investments have been concentrated around financial services. Yet last year just 20% of M&A and PE deals with LP participation landed in the sector, per PitchBook data, with a growing focus on alternative assets including real estate, energy and even IT. With increasing liabilities, LPs are diversifying their portfolios, and asset managers are feeling the need to follow suit by beefing up their offerings.