Source: www.breakingviews.com is Europe's leading financial commentary service
Date: July 2003
By Christopher Hughes
At the height of the bull market, the asset management industry could not expand fast enough. So why has it been so slow to remove the resulting excess capacity?
In the 1990s, the European asset management industry grew rapidly as US investment banks, life assurance companies and private banks threw money at it willy-nilly. The idea was to capture business flowing from European pensions reform. But that reform is taking a long time to materialize. And with the onset of a three-year bear market, it has become painfully clear that there are too many fund managers with too many products chasing too little business. London, the hub of the industry in Europe, is really feeling the pinch.
Why have fund managers taken so long to wake up to this? After all, the blood-letting in investment banking has been going on for ages. The answer is that the fund management industry has never learnt to ride the cycle.
During the bull market, it was convinced it was undergoing structural change. To the global US financial firms, asset management seemed to add stability to earnings.