- Allianz, Amundi, BNP lead in asset growth during first half
- DWS faces headwinds with outflows in low-margin products
- Push for high-margin private products has Morningstar concerned
The first half of 2024 revealed contrasting fortunes for European asset managers as they navigate volatile markets, shifting investor sentiment, and regulatory pressures. While some firms achieved strong inflows and robust asset growth, especially in passive products, others struggled with significant outflows and declining performance fees in the active market segment.
“It’s evident that the shift towards passive investments is forcing the asset management industry to reinvent itself,” Mara Dobrescu, director of fixed income ratings at Morningstar, observed when asked to review Investment Officer’s analysis of first-half earnings in asset management.
This shift has for some time already been a central theme, with managers forced to balance short-term trends—like the popularity of certain asset classes—with longer-term structural changes shaping flows, such as the rise of passive investments and ESG-focused funds.
Inflows and outflows: A tale of two extremes
Among the top-performing European firms, Allianz Global Investors reported total assets under management (AUM) of 2,309 billion euro as of June 30, 2024, thanks to 48.4 billion euro in net inflows in the first half of the year. Of that, 1,803 billion stemmed from asset management, which saw 14.1 billion in inflows.
Similarly, Amundi, Europe’s largest asset manager, reported positive results, with 15 billion euro in net inflows during the second quarter of 2024, raising its AUM to a record 2,156 billion euro. Amundi’s success stemmed from strong demand for fixed income strategies and its expanding passive product range.
Amundi “has benefitted from both short-term and long-term tailwinds: it has a very strong and growing passive platform, offered at very competitive cost,” said Dobrescu, referring to Amundi’s recent launch of a MSCI USA ETF priced at 0.03 percent, considered “extremely attractive” and pointing out that the firm has strong ESG credentials and has boosted its range of Net Zero funds.
“At a time when investors have begun reallocating to equities, the Amundi funds that specifically gathered the most assets have had this golden combination of being passive + ESG,” she said.
Trend points towards passive funds
The same trend towards passive funds is visible at BNP Paribas and DWS. BNP Paribas benefited from particularly strong inflows, posting 42.1 billion euro in total net inflows, especially in France and in money market funds. This contributed to a 6.1 percent increase in AUM, which reached 1,312 billion euro by mid-year.
On a net level, DWS Group faced significant challenges, reporting 18.7 billion euro in total net outflows during the second quarter, primarily from low-margin products such as fixed income, cash, and advisory services. Total net outflows for the first half amounted to 10.9 billion euro.
However, DWS saw a silver lining in its passive products, attracting 8.5 billion euro in net inflows through its Xtrackers exchange-traded products (ETPs), showing the firm’s ability to capitalise on the growing demand for passive investments. With that, the firm ranked number two by European ETP net flows in the second quarter.
Swiss-based Pictet Group reported stable fee income despite a 12 percent drop in consolidated profit to 320 million Swiss francs (341 million euro), as costs rose and operating income declined during the first half. Its AUM was up 10 percent at 694 billion Swiss francs, thanks to “favourable market conditions and new money inflows”
The total AUM for the top 10 European asset management firms as of June 30, 2024, stood at approximately 10,880 billion euro.
BlackRock’s contrasting performance
In contrast, New York-based BlackRock, the world’s largest asset manager, reported 10,600 billion dollars in AUM as of June 30, 2024, with 139 billion dollars in net inflows during the first half of the year. BlackRock’s continued dominance across ETFs, active fixed income, and private markets highlights its ability to capture inflows despite challenges facing some of its active strategies.
Even heavyweights can be vulnerable to specific circumstances, like the departure of a key portfolio manager. BlackRock’s BGF Euro Short Duration Bond fund suffered from the departure of its star manager, which coincided with a challenging period when investors were already shifting away from short-duration products in favour of longer maturities. As a result, the strategy saw outflows of approximately 2 billion euro from the start of the year through July.
Alternatives appeal due to higher margins
In terms of product innovation, firms like DWS, Schroders, UBS Asset Management, and HSBC Asset Management are increasingly focusing on alternative investments, which traditionally generates higher margins. Demand for private equity, infrastructure, and other non-traditional assets continues to grow, with UBS and HSBC leveraging their global reach to attract investors seeking exposure to these higher-margin products.
Asset managers increasingly seek out higher-margin products to compensate for the revenue decline in traditional segments. Private equity and private credit have emerged as key areas of focus. However, as Dobrescu from Morningstar points out, this trend comes with risks.
“At a more structural level, it’s evident that the shift towards passive investments is forcing the AM industry to reinvent itself,” said Dobrescu. “For one, it pushes towards consolidation (as evident by extensive M&A activity over the past few years) as asset managers are forced to build scale to compete in a lower-fee environment. Secondly, it has led many firms to enact cost-cutting plans and to try to do “more with less”.”
‘Some degree of skepticism’
“ Thirdly, this environment has pushed many asset managers to seek out higher-margin products specifically in private equity and private credit,“ she added. “That’s an ongoing development that we at Morningstar view with some degree of skepticism. On the one hand, there are certainly avenues to “democratize” private assets for investors with the requisite risk tolerance and long-term horizon.
“But asset managers are scrambling to establish a presence in the space, and such precipitation can lead to mistakes: for example, overpaying to buy a private asset specialist boutique, hiring teams with insufficient credentials, launching private assets products without sufficiently robust risk controls etc. Finally, we’ll see how these products will end up being priced for investors, as some firms may be tempted to ramp up management fees here to compensate for loss of revenue elsewhere.”
Top European asset management firms
by asset under management per 30 June, in billion dollars.
Source: Investment Officer, based on company reports.