Oakmark International, which has beaten 98% of its peers over the past five years, holds shares of Credit Suisse and Allianz SE, the German insurer that owns Pimco.
Jain’s Review
Credit Suisse is seeking to expand in hedge funds and vehicles that invest money in liquid assets such as stocks and bonds while paring private equity.
Deutsche Bank co-CEO Anshu Jain initiated a review of asset management last year after Germany’s largest lender was told by the European Banking Authority that it needed to raise capital. In September, after negotiations to sell the unit to Guggenheim Partners collapsed, Jain said it would make more sense to turn the business around. The bank seeks to double profit at the unit by 2015. Deutsche Bank, which combined asset and wealth management in June, named a senior leadership team for the division under Michele Faissola on Sept. 17.
“This is one of the toughest management challenges and largest turnarounds that we have,” Jain, 49, said in an interview in September. “Michele is very much being entrusted with a critical mission for us.”
In the U.S., where the pressure to sell assets has abated, the share of banks’ revenue generated by money management has increased. At Goldman Sachs, money management accounted for 14.9% of net revenue in the first nine months of 2012 compared with 11.5% in the same period two years ago, according to company filings. Trading revenue at the New York-based firm was 55% of net revenue, down from 59%.
‘Cyclical Business’
“Being in the cyclical business we’re in, there will never be a normalized proportion between asset management, investment banking and sales and trading,” Goldman Sachs President Gary Cohn said at an industry conference in May. “We have continued to really allocate or over-allocate resources into the banking business, into the asset-management business, understanding that those are our businesses that take a lot less equity capital.”
In May, Goldman Sachs acquired Dwight Asset Management, a $17 billion stable-value fund manager. Last December it agreed to buy a dividend mutual fund from Dividend Growth Advisors. The bank wants to grow assets by boosting fund performance, which is its priority, Eric Lane and Timothy O’Neill, co-heads of Goldman Sachs Asset Management, said in an interview.
“This is a business with consistent and recurring base fees,” O’Neill said. “We have a strong preference to grow organically, but we’ll look at bolt-on acquisitions where we can add opportunistically to our products.”
‘Real Gem’
JPMorgan, which last year became the first bank to crack the list of 10 largest U.S. stock and bond mutual-fund managers after more than doubling long-term assets since 2008, planned to spend more money on sales and marketing this year. Mary Erdoes, head of the New York-based firm’s $1.4 trillion asset-management division, described it in February as a “real gem” and said JPMorgan has “heavily invested in this business in order to set ourselves up for much future growth in the years to come.”
Wells Fargo, which a year ago agreed to buy Everkey Global Partners, an institutional money manager, is considering filling gaps in its product offerings in alternative-investment funds, small-cap stocks and European equity, said Mike Niedermeyer, who oversees the $450 billion unit.
“Acquisitions are attractive not because we’re trying to get scale, but because we are trying to get a fit,” Niedermeyer said in an interview. “Our focus will be on adding product quality or product depth.”
Expansion Challenge
Still, assets overseen by the industry globally have changed little over the past five years and are about $58.3 trillion, compared with $58.8 trillion in 2007, according to a September study byBoston Consulting Group. As investors have turned away from stock funds, they’ve deposited about $1 trillion into fixed income since 2007, according to data from the Investment Company Institute.
Most money is going to passively managed products, largely those that track indexes, and top-performing funds. That’s going to pose a challenge for banks seeking to expand.
Bloomberg News
