European asset managers must pursue economies of scale to stay competitive with their US counterparts, argues Vincent Juvyns, market strategist at JP Morgan Asset Management. Fragmentation across Europe’s capital markets is also a key issue that hinders competitiveness, he says.
This concern echoes one of the central themes of Mario Draghi’s highly debated report on European competitiveness. According to the former Italian prime minister, the European Union must urgently revive work on the Capital Markets Union (CMU)—an initiative that has been in the works for over a decade. The goal is to unify Europe’s fragmented capital markets, allowing companies to access financing faster and more cheaply through the markets.
A Capital Markets Union would involve, among other measures, the synchronisation of investment-related taxes across member states and the expansion of the European Securities and Markets Authority (Esma) into a unified stock market regulator.
Draghi’s Vision
However, Draghi’s broader vision, including his proposal for common European debt securities (eurobonds), has encountered political resistance. Several EU member states are increasingly favouring nationalist policies, making further integration a challenge.
«I believe Draghi’s direction is the right one, but the political appetite for it is lacking,» Juvyns said during a press briefing in Brussels on Thursday. He remains sceptical that the EU will advance towards a Capital Markets Union in the near future, predicting that substantial progress within the next five years is unlikely.
The contrast with the US is stark. American companies have much easier access to capital through the issuance of corporate bonds, reducing their dependence on bank loans. Additionally, a more ingrained investment culture in the US ensures higher levels of capital flow into stock markets.
This disparity has led some top European companies to question their listing locations. «A discount is created by the absence of a CMU,» Juvyns warned. He pointed to the example of TotalEnergies, which earlier this year hinted at the possibility of moving its listing to Wall Street. «This could be a sign of things to come.»
Draghi’s report paints a dire picture of what might happen if Europe fails to address these issues. In the absence of deeper capital markets, Europe risks losing its brightest growth companies to the US, making it difficult for a European tech giant on the scale of Apple or Microsoft to emerge. «Without high-growth projects to invest in and the capital markets to finance them, Europeans miss opportunities to build wealth,» Draghi writes.
«We need more European champions,» Juvyns said, adding that this challenge applies not just to corporates, but also to the asset management sector.
The trillion-dollar club
Juvyns believes economies of scale are critical for European asset managers to compete with the mammoth firms in the US.
Consider the numbers: Blackrock, the world’s largest asset manager, has more than 10 trillion dollar in assets under management, while Vanguard manages 9 trillion dollar, and JP Morgan 2.9 trillion dollar. The largest European player, France’s Amundi, manages 2.1 trillion euro, a distant figure by comparison.
In this context, Juvyns highlights the significance of the summer deal between BNP Paribas and Axa, where Axa agreed to sell its asset management arm, Axa Investment Managers, to BNP Paribas. The merger would combine Axa IM’s 844 billion euro in assets with BNP Paribas Asset Management’s 576 billion euro, resulting in a new entity surpassing the 1 trillion euro threshold.
«This merger creates a leading European asset manager and a global player,» Juvyns said «Europe needs more deals like this. You have to join the trillion-dollar club to compete effectively on the global stage.»
Juvyns’ comments underline a broader challenge for European asset managers: without significant consolidation, they risk being overshadowed by their US rivals, limiting their ability to compete for global capital.