Scale can work
Scale can work. The experience of
independent asset managers suggests there is
certainly a correlation between size and gross
margins.
Between 2009 and 2016, costs for
independents fell to 58 per cent of income from
66 per cent as assets under management rose
two-thirds to $9tn. Intuitively, in an industry
facing commoditisation from low-cost beta
products, scale can help to drive down unit costs
and support proftability.
It comes as no surprise,
therefore, that many firms have met the growing
structural headwinds in the industry by increasing
consolidation. This can be seen with recent
mergers, such as Standard Life-Aberdeen,
Henderson-Janus, and Amundi-Pioneer.
The trend shows no sign of abating. In August 2017,
Prudential announced the merger of M&G with its
life and pensions operation (Prudential UK and
Europe). This combination is expected to create
annual cost savings of £145m.
EU Forecast
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