There is a movement afoot in the world of independent Swiss asset managers, and several takeovers are in the offing, research by finews.com shows.

For years there has been a good deal of talk about consolidation among independent Swiss asset managers and for years nothing has happened, but now those familiar with the sector say things might be starting to move.

«Things are picking up,» said Reto Hossli, founding partner at Zurich start-up DR-RH which specializes in arranging hook-ups between asset managers and asset management companies.

Hossli is very familiar with the extremely fragmented sector. At Credit Suisse, his job included managing business with external asset managers. There are 2,000 individual asset management companies in the sector managing around 400 billion Swiss francs ($435 billion) of assets.

Larger Players Making Moves

«We’ve noticed an increase in activity as far as mergers between Swiss EAMs go at DR-RH. We’re seeing solid demand for mergers which widen the geographical footprint,» Hossli said.

He is involved in some of the negotiations and is therefore bound by confidentiality.

The head of corporate finance at big-four consultancy Deloitte, Anthony West, was also not prepared to name names «There’s been a lot of movement in the market on takeovers this year, and we expect this trend to continue over the next few years,» he said.

West added that larger asset managers in particular, with assets under management of over a billion francs, wanted to exploit the new regulatory environment to grow. He is also advising on several transactions.

«All Talk»

Asset management group Reuss Private would buy in a flash, CEO Felix Brem said. However, Reuss, one of the largest independent asset managers in Switzerland, had not yet found anything to buy. In Germany, the company has already snapped up several smaller competitors.

«It’s all talk and no action,» Brem said.

Would-be sellers had exorbitant price expectations and were not very willing to stay with the company for a few years after the sale, he added. Brem sees that as a prerequisite to taking on the acquired company’s clients successfully.

However, Brem said that pressure was mounting and that the long-prophesied consolidation really was drawing nigh.

Other members of the Alliance of Swiss Asset Managers (ASV)  – a networking platform for the larger players in the sector including heavyweights such as Aquila Group and Swisspartners – are probably thinking along similar lines to Reuss.

New Rules

Those familiar with the sector say there are various reasons why there may be mergers and takeovers. One reason which comes up, again and again, is regulation.

By the end of 2022, every independent asset manager will have to be regulated by an authorized supervisory organization (AO). Once they have been accepted by an AO, national financial watchdog Finma will check every application.

The license application is one thing, sources said. Things will become more complicated when the auditors come calling and processes have to be adapted, especially in the area of due diligence. This will become a reality and a «headache» for more and more asset managers over the next few months, a source said.

Over 100 Throw in Towel

Others have already made their choice. According to Finma, 121 asset managers will either close their businesses or merge them with others. Smaller companies last year gave that as a reason for not applying for a license.

Hossli said he had noticed that the new rules had given much pause for thought. «Regulation has caused people to question their existing business model,» he said. Integration might be one of the things to emerge from this.

Strategic Takeovers

Other players are joining the existing «consolidators» such as Aquila Group or Corum.

Cinerius, which is backed by U.S.-based alternative investment company Summit Partners, has been operating in Switzerland since March. Its aim is to make up to eight takeovers a year in Germany, Austria and Switzerland. Asset managers who want to shelter under Cinerius’ roof have to sell at least 75 percent of their equity.

Outsourcing as Alternative

Swiss EAMs may come to the conclusion that instead of selling up they should concentrate more on their core business. «Division of labor is the great buzzword», Reuss CEO Brem said. Smaller firms would almost be forced to outsource some services to other providers at some point in the future.

The tendency for various Swiss regtechs to bet on gaining contracts with independent asset managers has not come out of nowhere. Whether outsourcing will beat consolidation remains to be seen, but all those who talked to finews.com agree that the pressure is mounting.