March 18, 2009 / 10:24 AM / in 9 years

Tough times bring fund sector consolidation

LUXEMBOURG (Reuters) - A wave of mergers and acquisitions could sweep the fund management industry this year as players come under pressure from the market turmoil, said speakers at the Reuters Funds Summit.

One leading hedge fund manager added that the consolidation could lead to the disappearance of half of the current hedge fund players.

“I would say that if half had to close, I wouldn’t be surprised,” said Ken Kinsey-Quick, head of multi-manager products at London-based hedge fund Thames River Capital LLP.

“The consolidation is happening right now. By summer it will be done and dusted. Those that are going to be around, it will be pretty clear in June who those will be,” he added.

Both hedge funds and more mainstream fund management companies have faced having to merge or be taken over due to the effects of the financial crisis, which has led to massive withdrawals of clients’ money.

Earlier this year, French banks Credit Agricole (CAGR.PA) and Societe Generale (SOGN.PA) announced a merger of their fund management divisions.

Last year, failed Wall Street bank Lehman Brothers sold Neuberger Berman to its managers, Credit Suisse CSGN.VX hived off some funds businesses to Aberdeen Asset Management ADN.L and Allianz (ALVG.DE) bought Commerzbank’s (CBKG.DE) Cominvest.

Yves Francis, a Luxembourg-based partner at auditing and consultancy firm Deloitte SA, said smaller fund management companies could be particularly vulnerable.

“I think we will see a lot more consolidation happening in the market. We will also see smaller players being acquired. Smaller or mid-tier players will be looking for partnerships.”

Jose Placido, chief executive at RBC Dexia Investor Services, said any forthcoming deals were likely to be “smaller in nature” but added that some potential acquirers were waiting on the sidelines to see how the financial climate evolves.

    “Everyone’s just taking a pause and waiting to see where we’ll go from here,” said Placido.

    BNP Paribas (BNPP.PA) board member Alain Papiasse also told Reuters that the French bank could examine possible opportunities in the asset management sector. BNP is currently in the process of trying to buy some of the main assets of struggling European rival Fortis FOR.BR.

    “Our CEO has indicated to analysts that we could look at new consolidation opportunities provided that we end up with control from any deal. We continue to think that this (asset management) is a core business for us,” said Papiasse.

    Thames River Capital’s Kinsey-Quick said the process of consolidation in the asset management industry would mean that only the fittest would survive.

    “The hedge fund world is, generally speaking, Darwinian even in the best of times.”

    Editing by Editing by Hans Peters

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