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Supplements » Global Industry 2020

London roundtable: Operating in the new normal

Funds Europe – Apart from Covid-19, what other risk would you cite as the current major factor for the asset management industry?

Creswell – I would simply say the biggest risk to our industry is actually mission creep by regulators, who seem to be going quite a long way beyond the European Union Directive, quite a long way beyond their brief. What we see potentially happening is a dismantling of the delegation model, but we’ll cover that more in the next question.

Ide – When we do start coming back to work, it’s going to be challenging for office locations with not very good accessibility. I’m conscious of that here in Edinburgh, because it’s such a great location and commuting is easy. I walk to work here, but I think there are some major cities where it’s going to be less attractive for people to spend time commuting. They’re probably more likely to want to work from home. Potentially, businesses will have to rethink their whole real estate strategy so that the buildings and where people get together are located in much more accessible areas. There’s also going to be an ongoing question about how the law adapts itself to remote working. What’s the tax location of someone who’s working somewhere else, if they decide to move to a different country?

Pilbeam – If you’re going to be working from home, you need to be mentally healthy, and that is something I’m sure all of us would take extremely seriously: we need to make sure that employees are feeling comfortable and are happy in the working environment that they’re in.

One of the other things that we are potentially seeing could well be consolidation. It’s a large trend that’s been ongoing for a number of years now. Will this pandemic accelerate that?

Creswell – I would turn the question upside-down and say that, apart from Covid, never let a good war go to waste. The industry has more opportunity now, because management structure is being thrown up in the air, consolidation is well and truly on the table and the capital markets are prepared to finance and support consolidation. I see very few structural risks to the industry, and actually considerable upside, because the pressures that we’ve been under over the last ten years are now recognised and we’ve got the management tools, we’ve got the finance and we’ve got the motivation to reform the industry. Our industry is going to grow very substantially over the next ten years, the capital markets are going to increase, the amount of money floating around the system is going to increase, so really there’s very little risk to the industry. There’ll be some losers, but on balance, the industry is going to grow and there’s just massive potential and upside.

Smith – As a born optimist, I think about turning risk into opportunity; those two things do often go hand-in-hand. The reputation of our industry has taken a few knocks in the last decade or so, but I think there definitely is an opportunity for us to rebuild its reputation and demonstrate that we do care deeply about creating value for clients, but also this question of marshalling capital to secure a better future world for everybody. The good news is that the pandemic has accelerated a number of things, especially real long-term action around sustainable investing and climate action. That has created the opportunity for the industry to come together as one and address these imperatives.

Duval – Firstly, there is fantastic opportunity ahead of us. There’s a lot of cash accumulating into bank deposits. That is the opportunity for us to demonstrate that we can add value above cash, which maybe ten years ago we would say, ‘Easy,’ today it’s not that easy, but that’s our opportunity to really show our value add as asset managers. 

The second thing is a risk: liquidity. Trading bonds, even investment grade bonds, was very difficult at some point between February 28 to the beginning of May; it was not rare to trade at 5%, 7% or 9% discount. One day it took us more than four hours to trade 70 million: at Amundi’s size, it’s quite astonishing. The industry still has a tendency to mismatch liquidity. In terms of liquidity, we are our own demons. So, at Amundi it is very clear that it’s liquidity first and performance second.

Cicconetti – The ongoing M&A trend in the asset management industry. From my perspective, firms involved in such deals also have the challenge to transform the cost of the increase in size and resources into potential revenues through a more sophisticated product offering. Something that can combine different expertise. What I am referring to here is that even global capital allocators don’t have time to regularly assess the equity and the credit value for each company. Combining different capabilities and offering products/solutions able to select different outcomes from equity, credit and, why not, private and public. This will give clients access to innovative solutions which they are likely happy to pay for. I hope that M&A deals can also be a driver to create different and innovative revenue streams and not only an exercise of incremental cost synergies.