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Capital Markets

Has the asset management love affair ended?

Asset management profits drop; Diversification is no longer in vogue

It once seemed to make sense that owning an asset management business would provide a bank with diversification. The steady stream of revenue would mitigate or offset the choppiness of trading or investment banking revenues.

"These days, that model doesn’t look so smart," says Richard Phillipson, director of institutional consulting at Investit, a consultancy to the investment management industry. "During this crisis, both investment banks and many fund managers will not have made a profit. With two downturns in a decade (that of 2000 to 2003 and from 2007), investing and savings projections and market levels that were used in fund management models just have not happened." Barclays’ decision to sell its asset management arm BGI, and that of Société Générale in April to merge its asset management business with Calyon, point to an emerging trend of banks seeking to distance themselves from investment management.

fall in value of global professionally managed assets

According to a survey by Boston Consulting Group, about 80% of asset managers suffered profit declines in 2008, while about 70% witnessed revenue decreases as well.

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