The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.

Fund managers drive banks to despair

At the top of the market, every ambitious bank wanted to own a global asset management operation. They were prepared to pay high prices for supposed steady earnings providers. But as markets have plunged revenues have tumbled and now banks are wondering what investment houses are really worth to them.

THE FIRST RULE of investing is that the value of your portfolio can go down as well as up. Everyone knows this, from the average retail investor to veteran portfolio managers at Fidelity. Yet it's a rule that seems to have been thrown aside by the banking world when it came to buying asset management companies during the last bull market.

The theory was that as an investment bank your earnings stream is highly volatile. What better way to counter-balance that than to build a global asset management operation? Its revenues are steady and, according to the received wisdom of the time, cycle-proof.

So how does this explain why all of a sudden banks are keen to offload investment divisions?

If the first rule of investing is clear, then so is another: don't buy at the top of the market and, if you do, don't then sell at the bottom.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree