Pioneer forecasts greater consolidation in Europe

The consolidation trend which has been sweeping both the European and US asset management industries in the last couple of years is just the beginning of a more profound long-term trend. This is set to affect both manufacturing and distribution, said Pioneer Investments’ Milan-based chief executive officer Giordano Lombardo. In Europe, a “national champion model” still prevails, said Mr Lombardo, leaving room for additional mergers and acquisitions activity. When looking at the European retail markets, analysis shows the top three asset managers are still “predominantly local players” and they hold a high percentage of assets, up to 47 per cent in France and 56 per cent in Germany. Below this, assets are still fragmented among a large number of smaller players, with France leading the trend with 236 small asset managers. In the first half of 2006 in Europe there were more deals than in all of 2005, according to Pioneer’s estimates, and the volume of assets acquired amounted to more than $250bn (e193bn). This figure is higher than annual figures for 2002, 2003 and 2004. It is also set to beat the 2005 record figure of $380bn. The decoupling of manufacturing and distribution is the main driver of mergers and acquisitions, said Mr Lombardo. But unlike in the US, where the separation between production and distribution is determined by regulation, in Europe it is explained by a market force, he said. However, the takeover of Germany’s HypoVereinsbank by Pioneer Investments’ parent company Unicredito Italiano, announced in 2005, was more about synergies at the asset management level between the two banks, explained Mr Lombardo. Another reason for the merger concerned the “key strategic importance” that Central and Eastern Europe (CEE) holds for Pioneer Investments. The German group had a presence in all Eastern European countries where Pioneer did not, stated Mr Lombardo. The combined group manages ?8bn in the CEE region, with Poland its largest market with $5.5bn of assets under management. CEE is the area in Europe where there are “the best opportunities for growth”, said Mr Lombardo. GDP is growing by between 4 and 6 per cent per year in most of these markets. But more astonishing is the fact that from 2000 to 2005 the household financial wealth in CEE markets has multiplied by a factor of three or even four in some cases. “The potential for the investment industry is still huge,” he said, pointing out that fund assets per capita are still low. This is because most financial wealth is held in deposits and current accounts rather than managed assets. Dario Frigerio, chief executive officer and head of wealth management at UniCredit, says the biggest challenge for a company expanding in CEE countries is the same as in all markets: building a fund platform which will en���cour��age clients to think of funds as long-term investments, not in terms of shares. “It is a matter of education of the customers and having the right presence in terms of relationships,” said Mr Frigerio. ” ET

Lombardo: market forces prevail