Shrinking fees, rising costs and the continued shift to passive investing have created a structural identity crisis among Europe’s asset managers. Some firms are pursuing mergers to scale up. Others are focusing on innovation and client-centric investment cultures.
For professional investors and wealth managers, the key question is not who survives, but who adds lasting value.
A new Morningstar report offers a clear answer: investors fare better with firms that grow organically than with those pursuing consolidation. Agile, client-focused strategies deliver stronger long-term outcomes.
“Successful asset managers are likely to focus on innovation, digital transformation and personalised, tech-driven solutions rather than scale,” said Monika Calay, head of UK manager research at Morningstar. “Selective consolidation may continue, but agile growth strategies are better positioned to shape the industry’s future.”
Consolidation disappoints
Mergers are again making headlines. BNP Paribas plans to acquire AXA Investment Managers. Natixis is preparing to merge with Generali Investments. Amundi and Allianz Global Investors reportedly explored a tie-up that would have reshaped the industry. That deal fell through. It may have been a missed opportunity, or perhaps a bullet dodged.
Morningstar’s data suggests the latter. Over the past decade, many high-profile mergers failed to deliver on their promises. Instead of improved performance, lower fees or higher profits, some led to outflows and goodwill impairments. Janus Henderson and Aberdeen Standard Life, following headline deals in 2017, both recorded substantial goodwill write-downs in subsequent years. That is a clear sign that expectations weren’t met.
“Fund investors have not enjoyed any fee reductions, even in areas like emerging-market debt or high-yield strategies where synergies were expected.”
Morningstar, commenting on GSAM’s 2022 takeover of NNIP
The investor benefits of Goldman Sachs Asset Management’s two billion euro acquisition of NN Investment Partners in 2022 also remain unclear. “Fund investors have not enjoyed any fee reductions, even in areas like emerging-market debt or high-yield strategies where synergies were expected,” Morningstar noted. While some clients may welcome broader product access, the advantage is marginal.
The study identifies five recurring post-merger risks: cultural mismatch, leadership complexity, talent loss, product disruption and bloated operations. These factors often distract from the priority that matters most to investors: generating consistent returns.
“Even for corporate shareholders, consolidation benefits often remain elusive,” Morningstar concluded after reviewing three major asset management mergers. “None achieved meaningful profitability improvements.”
Organic growth outperforms
By contrast, firms that grow from within — what Morningstar calls Organic Growers — tend to outperform on key structural measures. These firms were more likely to receive “High” or “Above Average” scores on the Morningstar Parent Pillar, which evaluates governance, stability and alignment with investor interests.
Crucially, they also foster stronger investment cultures, retain talent and make deliberate, long-term decisions that benefit fundholders. Many invest earlier and more effectively in digital infrastructure, ESG integration and customised solutions for institutional clients.
“Organic growth models tend to support stronger investment cultures and more fundholder-friendly practices than acquisition-driven approaches,” the report concluded.
Fees and performance
Morningstar’s analysis also challenges assumptions about fees. In passive strategies, costs have converged across the industry due to fierce competition, not mergers.
In active management, fee levels reflect a firm’s value proposition and market positioning more than its size or growth model.
Performance metrics tell a similar story. The study found no significant performance advantage for either consolidators or organic growers, when measured by the ability of active funds to outperform passive benchmarks. But context matters: performance is harder to sustain during organisational upheaval, and investor experience often suffers when product ranges are rationalised or portfolio managers are distracted by integration work.
Focus on fundamentals
For asset allocators, CIOs and fund selectors, the message is clear: size does not guarantee value. The most client-aligned firms are often those that grow gradually, by refining investment processes, ensuring operational stability and investing in targeted innovation.
Morningstar’s findings support what many in the industry already suspect: a disciplined organic growth strategy, grounded in strong culture and clear investment identity, is a better predictor of positive investor outcomes than headline-grabbing M&A activity.
“Where firms have pursued M&A, our research shows this hasn’t consistently delivered better investment performance or lower costs for investors,” Calay said. “Pricing pressure, especially in passive products, remains intense across the board, with fee convergence driven more by market forces than by consolidation.”
Further reading on Investment Officer Luxembourg:
- Natixis’ Setbon warns of sector upheaval as costs keep rising
- Europe’s largest asset manager emerges from BPCE, Generali deal
- Sandro Pierri: Good old days in asset management are over
- The French have made the ‘banking dream’ come true with BNP-AXA deal