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Industry divided on merits of consolidation

Citi LandscapeThere is a broadly equal split within the asset management industry as to whether the ongoing mergers and acquisitions among firms is good for the market, suggests a recently published survey.

The research carried out by Funds Europe and supported by Citi asked respondents if asset manager consolidation is a net positive for investors. While 38% said yes, an almost equal number (40%) said no.

On the one hand, continued consolidation will produce a greater number of firms with the scale to survive the continuing pressure on margins, costs and competition, as well as operational complexity.

On the other hand, it will also reduce choice for investors and possibly reduce variety. It is less clear if we will end up with a less innovative market as a result.

What is clear though is that consolidation will continue regardless, as stated by 90% of respondents. The ability to gain scale was ranked as the biggest driver (42%), followed by cost reduction (23%).

According to Pervaiz Panjwani, head of Emea custody at Citi, the focus on costs and scale highlight the importance of prioritising operations during a consolidation. “Without a solid operational foundation, firms face the risk of not being able to realise the cost and scale efficiencies, which can derail a merger,” he said.

The survey, ‘The changing European fund landscape – what does the next decade hold’, asked respondents to select the most likely developments in product development, distribution and market structure over the next 10 years.

The research, which involved a total of 88 investment professionals, can be accessed here.

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