Asset managers have begun to “self-cannibalise” at a rate which could see just 10 companies control the entire fund market in less than three years, finance specialist Jon Beckett has warned.
Mr Beckett – who has held senior positions at Standard Life, Franklin Templeton, Scottish Widows, and the Association of Professional Fund Investors – said asset management could mirror the rapid rate of consolidation in the banking sector, creating a handful of “super funds” and leaving fewer assets for smaller players.
He pointed to figures from the Investment Association which indicated the assets under management of the 10 largest firms grew by 200 per cent between 2008 and 2013.
He said: “While we must hope that competitive forces will slow this trend, customers who value choice over simply price have much to be concerned about.”
Phil Wagstaff, Henderson’s global head of distribution, said: “Buying funds has become more robust and process driven, so it’s inevitable people end up with the same funds in their portfolio.”
James Spence, managing partner of asset manager Cerno Capital, disputed whether it would be bad for small firms to “morph into institutions”.
But investment advisers disputed whether increased mergers and acquisitions among fund managers would be a problem.
“There are a lot of active funds out there not delivering on their performance targets, and charging too much,”, Matthew Harris, IFA and director of Fife-based Dalbeath Financial Planning, said.
Ben Yearsley, investment director at the Wealth Club, said a potential decline in firms will curb competition, meaning more fund managers hug the benchmark because there is no incentive for them to “rock the boat”.
Mark Polson, principal at consultancy firm the Lang Cat, said it would not be a big surprise if funds under administration became concentrated into a few big groups, particularly if vertical integration and the drift to passives continues.
katherine.denham@ft.com
