How do you explain the increasing number of mergers in the Asset Management sector, particularly in France?

Pascal Koenig : Indeed, the operations of M&A, search for new shareholders, team transfers have multiplied in France in recent months. These are both "strategic" operations (complement of management teams, positioning on distribution sectors, need for new financing to accelerate development, etc.) but also more fundamentally search of economies of scale by increasing outstanding assets in order to better defray the costs of support functions and cope with the pressure on prices. We therefore believe that these concentration movements should continue, including among the leading players.

Geeting into new technologies and digitization. Is is a solution to maintain asset manager margins ?

Investments in new technologies will increase significantly in the coming years and should lead to improvements across the value chain in front office, distribution and infrastructure functions. However, even if the majority of management companies are still reluctant to engage in such an approach, those who have made the move today realize productivity gains to maintain their margins.

In the current context of low interest rates, fierce competition for institutional tenders and passive management pressure, there is a clear downward trend in management fees…

Pascal Koenig, Partner at Deloitte, Head of asset management

Have you seen a downward trend in management fees?

Yes, in the current context of low interest rates, fierce competition for institutional tenders and passive management pressure, there is a clear downward trend in management fees. However, some niche strategies or distribution areas still enjoy good margins.

What future for active management against ETFs?

ETFs now account for around 15% of total outstanding assets in Europe. Last year, these assets have certainly increased but less than expected by specialists in the sector, which reinforces the idea that truly active management will always have a full place in the industry.

Is SRI / ESG the next growth vector for the asset management industry ?

It’s hard to ignore the current craze for SRI products. Thus the net flow growth is up +2,7 % in France, in 2018 and +35 % for SRI conviction funds. Moreover, France has become the second largest global green financial market with 7 of the top 10 European climate funds.

What about alternative strategies ? Do these strategies deliver their promise of market return decorrelation ?

If by alternative strategies, you mean portfolios invested in tangible products, we can only note the attractiveness and the appetite for this type of products. SCPI and OPCI continue to collect strongly (at a slower pace than in 2017) and deliver more than acceptable performance. For Private Equity, the trend is the same. The challenge for asset management companies is to identify goods to be bought at still reasonable prices in order to deliver the promise of return.