Sandro Pierri: Good old days in asset management are over

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Sandro Pierri, CEO BNP Paribas Asset Management and chair of Efama.

European asset managers are grappling with a quadruple challenge: fragmented markets, capital outflows to the United States, demographic shifts, and a profound transformation of the industry. Sandro Pierri, CEO of BNP Paribas Asset Management and president of the European Fund and Asset Management Association (Efama), outlined these issues speaking to Investment Officer at the Investment Management Forum in Brussels.

According to Pierri, the answer to these challenges is clear: asset managers must fulfill their fiduciary duty to clients while adapting to the fundamental changes reshaping the sector. “The good old days of the last 20 years, where undifferentiated growth was driven by market performance and strong inflows, are over. At the same time, we are seeing a shift in investor choices,” he said.

Fiduciary duty takes priority

Pierri emphasised that client interests must come first, even when this conflicts with broader economic goals in Europe. “Our fiduciary duty is to provide our clients with the best possible risk-adjusted returns. That is our primary responsibility,” he stated.

Major asset managers, including Amundi and DWS, have recently highlighted the significant capital outflows from Europe to US markets. A Brussels report estimates that around 300 billion euros in European savings flows to the US each year.

Fragmentation harms competitiveness

A key factor behind Europe’s challenges is the fragmentation of its financial markets. While the US benefits from scale, with a large integrated economy and a strong culture of equity investment, European markets remain fragmented, limiting the ability of asset managers to achieve similar efficiencies.

“This has allowed US asset managers to achieve economies of scale and become global leaders,” Pierri explained. “In Europe, we’re not there yet. Market fragmentation remains a major hurdle.”

This fragmentation creates a vicious cycle: investors choose US equities for their superior performance, further boosting liquidity and valuations there while lowering capital costs for US companies. These firms then use their advantage to expand globally, often acquiring European competitors.

The AXA Investment Managers acquisition

BNP Paribas aims to strengthen its global position through the planned acquisition of AXA Investment Managers for 5.1 billion euros. The transaction, expected to close in 2025, would bring BNP Paribas’ assets under management to 1.5 trillion euros.

Although Pierri declined to comment on the deal, it is seen as a move to address the need for greater scale. “Achieving a less fragmented market will create the conditions for European asset managers to become more competitive,” he noted.

Demographic time bomb

Alongside structural challenges, Europe faces a demographic crisis. Declining birth rates and aging populations are slowing long-term GDP growth, compounding the difficulties for asset managers striving to generate sustainable returns.

“We’ve been accustomed to thinking in terms of a world that’s constantly growing, but we’re now moving toward a scenario where the global population will peak,” Pierri warned. “Even China’s population is set to peak, with profound implications for long-term GDP growth.”

Reforms offer hope

Despite the hurdles, Pierri sees opportunities to strengthen Europe’s competitiveness. He pointed to the European Commission’s efforts to develop a Savings and Investment Union as promising, along with initiatives to simplify regulatory frameworks and strengthen equity markets.

Efama director-general Tanguy van de Werve highlighted pension funds as a key lever for change. “Pension funds and insurers, with their long-term horizons, can play a major role in private equity and other investments that drive economic growth,” he said.

Urgent need for action

Other CEOs at the forum echoed the need for swift reforms. “There is a massive sense of urgency for European countries to act quickly and make their markets more competitive,” said Joseph Pinto, CEO of M&G. “We need to learn from the UK and US in terms of deregulation and create a growth agenda. The next 10-15 years won’t give us the same luxury of time as the past 15, where the focus was on stabilising the system,” he added, referencing post-financial crisis reforms.

US managers dominate

Source: BVI.