Mid-Sized Asset Managers Being Squeezed – Report

Contributing Editor

21 September 2005

Mid-sized investment managers are being squeezed between niche firms and larger investment managers, according to research from the Bank of New York. The report, entitled Survival of the Fittest: Future Leaders in Investment Management, said that investment managers need to find more effective means of differentiating themselves if they want to grow and prosper in the industry. “There will always be mid-sized investment managers as they decide to go from large to niche or from niche to large. However, the main issue faced by medium sized management firms is how to survive while they are there,” said the report. Approximately 43 per cent of larger investment managers believed a broad product range would become a more successful strategy than niche offerings, whereas around 45 per cent of small firms disagreed and opted for the niche option. In contrast, the medium sized managers were evenly split between those who supported broader product strategy and those that supported niche offerings. “The problem is that many mid-sized managers don’t quite know where they belong or where to market themselves,” said the report. This is likely to result in further acquisitions. According to the report, performance and effective people management are regarded as key driving factors for growth, but more is needed if investment managers want to stay ahead of the pack. The Bank of New York report said that the crowded market will see more fragmentation between distribution and manufacturing, and increased competition by front offices for high flyers and star performers. Investment managers are also more likely to turn towards more branding and marketing in a bid to gain increased recognition by trustees at beauty parades. The report was based on 63 in-depth interviews with senior executives at investment management firms and consultancies in the US, Europe and Asia.