It has been a rocky relationship but banks are falling back in love with their fund management arms. The idea would have been unthinkable five years ago, when many believed it was a case of when, not if, investment banks would look to sell off their divisions.
After the financial crisis, banks including Barclays, Rabobank and Bank of America Merrill Lynch sold funds arms, while Credit Suisse and Morgan Stanley sold large chunks of theirs. SocGen and Crédit Agricole merged their asset management arms into one, Amundi, and spun it off as a separately listed firm.
Today seven of the world’s 20 largest fund managers are still owned by universal banking groups as JP Morgan, Deutsche Bank, Goldman Sachs or BNP Paribas.
Of the bank-owned fund managers, Goldman Sachs’s investment management division was the best performer, reporting net flows of $94 billion. In contrast, BlackRock and Vanguard, the world’s two biggest independent fund managers, clocked net inflows of $150 billion and $256 billion, respectively.
The increasing appeal of index-tracking funds and exchange-traded funds has played a large part in that. Vanguard’s strong position in low-cost passive management is well-known, and the lion’s shares of BlackRock’s 2015 flows were into its iShares ETFs.
Guillaume Prache, the Managing Director of BETTER FINANCE, declared that asset managers and life insurers should be separated from their commercial banking arms. He said: “In-house asset management is a major issue of universal banking in continental Europe for retail clients, as it is still the dominant retail distribution network and it is still selling mostly in-house investment products to captive clients. Most of these networks do not propose third-party funds as an alternative to the mass market, and we suspect the in-house retail funds are, on average, worse performers as they don’t face real competition.”
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