GLOBAL - Consultants Cerulli Associates has predicted that the fund management market will begin to fragment from 2003 onwards, reversing what the firm called a "frenzy of M&A activity".
Following the high point of mergers and acquisitions within the fund management industry, Cerulli claims that from 2003 onwards there will be an explosion in the number of boutiques. Cerulli attributes this to star managers being freed from the contractual lockups framed in the 2000 merger spree.
In this environment, Cerulli predicts that firms with more than US$150bn will hold less than 60% of global industry assets and that the 100 largest firms will represent less than 75% of the entire market place. As evidence, Cerulli points out that the market share of the 25 largest fund managers has only grown to 42% from 38% over the period 1995 to 2000.
According to the consultants, organic growth is the only proven way to steadily grow assets under management. As evidence, Cerulli notes that US firms that focused on organic growth grew faster than those that focused on growth via acquisition.
Over a seven year period ending December 2000, growth orientated firms saw assets under management rise by a compound annual growth rate of 20%, compared to the industry growth of 15%. The results for UK asset managers followed a similar pattern, according to Cerulli.
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