Asset management is a size game – one that UBS would like to play, but for one small problem.
The Swiss bank remains open for takeovers to bolster its asset management division, Chairman Axel Weber (pictured above) reiterated in an interview with «Manager Magazin» (behind paywall, in German). Consolidation among money managers make sense because it leads to scale, the 63-year-old overseer told the German outlet.
Except, «Most see themselves as buyers. Nobody wants to sell.» The UBS boss is in good company: J.P. Morgan CEO Jamie Dimon made an unsuccessful play for Eaton Vance and its $500 billion in assets, the «Financial Times» (behind paywall) reported on Thursday.
Instead, the U.S. bank – which manages $2.6 trillion – was beaten to the punch on buying the mutual fund boutique by hometown rival Morgan Stanley, which manages $1.2 trillion.
Jamie Dimon's Shingle
The defeat resulted in Dimon(pictured below) effectively placing a classified ad for asset managers: If you’ve got brilliant ideas, give me a call,» the Wall Street veteran said earlier this month at J.P. Morgan's investor day. «If you’re a competitor investment bank and you bring the idea, you get the fee.»
Dimon's seemingly throwaway comment reveals that the clock is ticking – even for giants. For now, the industry is still acting from a position of strength, while banks are expected to be hit with fallout from the pandemic-induced economic crisis next year. «The urgency to act needs to become greater,» Weber told the outlet, though this would also make potential targets less attractive.
The coronavirus crisis has already led extended the lead of asset management giants like U.S. houses Vanguard and Blackrock, dominant in listed index-tracking funds, or ETFs. The passive products were in hot demand due to their liquidity during market ructions in the early days of the pandemic.
Even Giants Shudder
Even top industry players are looking to bulk up: State Street, the world's second-largest issuer of ETFs, is looking for a fund tie-up, according to «The Wall Street Journal». State Street Global Advisors, the fund arm, manages about $3 trillion, less than half of the $7.8 trillion of U.S. rival Blackrock, or of Vanguard's $6.3 trillion.
State Street and UBS seemed close to an agreement in the summer after several months of chatting, according to the U.S. outlet. The Swiss bank oversees roughly $980 million in the asset management unit, which was at the center of talks last year with DWS, Deutsche Bank's fund arm.
«Scale» Sought
The Zurich-based wealth manager maintains a wide range of active funds as well as – by European standards – a large ETF business. It is also keen to expand its private market capabilities, where the bank in October clinched a wealth partnership with Partners Group. The Swiss, like their peers in Europe, lag the industry giants in size.
This underpinned speculation that UBS could mesh with archrival Credit Suisse's asset management. The latter bank's 439 billion Swiss franc ($496 billion) unit is considerably smaller and undergoing a strategic review. Credit Suisse revealed to investors on Tuesday that it is sticking with the business for now, and wants to earn more in distribution in particular – once more, so-called scale is the magic word.
