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March 17, 2013 4:35 am
Smaller asset managers are struggling to win business across much of Europe as the growth of fund “platforms” is increasingly channelling flows into the hands of the biggest houses.
In both Switzerland and Austria, almost two-thirds of assets on business-to-business platforms are managed by just three houses, according to data from The Platforum, a research group.
The largest three houses control more than half of the €300bn of assets held on platforms in Germany, Italy, Sweden and the Netherlands, while in France and Spain they hold around 40 per cent. Only in the UK is the figure markedly lower, with the top three houses accounting for just 24 per cent of the €240bn held on platforms.
The level of industry concentration is unprecedented in a sector so fragmented that 600 asset managers have funds listed on French platforms alone.
Holly Mackay, chief executive of The Platforum, said the level of concentration was likely to rise still further.
“Consolidation is evident across Europe with more than 70 per cent of platforms anticipating that 65 per cent of flows will go to just 10 fund managers by 2015,” she said.
Ed Moisson, head of UK and cross-border research at Lipper FMI, a data provider, said there were signs that the industry’s “winner takes it all” phenomenon was growing, with the top-10 bestselling funds in Europe accounting for 23 per cent of fund sales last year, compared with 8 per cent as recently as 2005.
However, Mr Moisson said this figure may be partly due to the growing popularity of bond funds, a sector dominated by specialists such as Pimco and Franklin Templeton, rather than equity funds where competition is more intense.
B2B platforms, such as those operated by Allfunds, Cofunds and BNP Paribas, are used by fund distributors such as high street banks, private banks and financial advisers.
They have risen in popularity in recent years, with The Platforum estimating that assets held on open-architecture advised platforms in Europe standing at €957bn at the end of September 2012, up 29.3 per cent from a year earlier.
The sheer volume of money has led to concerns that inflows will increasingly be directed to the largest funds, which are better able to absorb large sums.
Ms Mackay has previously warned that many midsized fund managers will be forced to “shut up shop”, leading to a sharp fall in the number of fund managers and funds.
The heightened concentration of fund flows comes even as the range of funds offered by many platforms in Europe is broadening.
The banks and insurers who control many of the largest platforms on the continent are gradually including a wider range of products from rival providers as “open-architecture” spreads.
However, Ms Mackay said this was not necessarily creating a level playing field; although Germany’s funds market has been open architecture since 1994, the top three players, which are all banks, still control 58 per cent of the market.
“As a rule of thumb, 90 per cent of fund sales by banks in Germany are the banks’ proprietary funds. If you are a foreign player expecting to sell funds through a German banking channel, don’t hold your breath,” said Ms Mackay.
She warned that moves to restrict commission payments, which provide an incentive to sell third-party funds, across much of Europe could encourage some bank-controlled platforms to retreat to a more closed-shop world.
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