Fund managers gather as their industry reshapes

By Joel Dimmock

LONDON (Reuters) - Fund managers meeting in Monaco next week for an annual jamboree are facing tougher demands from investors made nervous by the fallout from the credit crisis, as the sector embarks on a wave of consolidation.

Following their hedge fund peers who gathered in the jet-set seaside resort this week, fund managers are digesting the $13.5 billion (8.2 billion pounds) deal which will create BlackRock Global Investors, an industry behemoth with double the assets of its nearest rival.

Industry watchers across the board expect to see more mergers and acquisitions (M&A) as the struggle for survival intensifies, leaving fund managers to weigh up their employment prospects.

"There are a lot of managers interested in acquiring something and building out the investment areas they don't have," Robert Lee, analyst at Keefe, Bruyette & Woods, told Reuters in the wake of the BlackRock deal.

Geoff Bobroff, president of U.S. mutual fund advisory firm Bobroff Consulting, has picked out mid-market players like Putnam Investments and Janus Capital as consolidation players.

"The thing that will most likely stimulate another wave of mergers is another downdraft in the market," Bobroff said.

Tuesday will see some high-profile players kick off the debate as the CEOs of Aberdeen Asset Management (ADN.L), Jupiter Asset Management, Aviva Investors (AV.L) and Allianz Global Investors Europe (ALVG.DE), take the stage to ponder a "New Model" for the industry.

The discussion is likely to dwell on the outcome of consolidation and Aberdeen chief Martin Gilbert has already predicted an industry dominated by a handful of major players along a coterie of more nimble boutiques.

BlackRock (BLK.N) CEO Larry Fink told Reuters much the same earlier this week.

REVENUE HOLE

The forum is also a chance for fund firms to put their case to clients, and to gauge just how cautious they will be in their product choices in the wake of credit crunch losses.

Senior executives from Schroders (SDR.L), BNP Paribas Asset Management (BNPP.PA), HSBC Global Asset Management (HSBA.L) and Dutch pension fund ABP will on Wednesday examine how firms can win back trust, and business from unnerved investors.

And the following day will see yet more CEO hand-wringing over how they can best offer the security, quality and safety that have returned to the forefront of clients' minds.

The credit crisis has thrown up headline challenges over performance and money flows, but has also posed longer-term issues over the strategies firms can sell to clients -- and crucially the fees they can charge.

Many mainstream fund houses have embellished product ranges with absolute return funds, and so-called "new balanced" or diversified funds which offered a welcome boost to bottom lines as they carry far higher margins than traditional offering.