Academic journal article ABA Banking Journal

Dig in! Banks' Slice of Asset Management Pie to Grow

Academic journal article ABA Banking Journal

Dig in! Banks' Slice of Asset Management Pie to Grow

Article excerpt

Current characteristics of the asset management business, combined with several long-term trends should push more of this business toward banks and insurance companies, according to Goldman Sachs vice-president Todd Owens. In a presentation at the ABA/BMA Trust, Asset Management and Marketing Conference in January, Owens said several factors point to a significant consolidation in the worldwide asset management business. These include the need for scale; demographic changes favoring the retirement market; numerous small and mid-size players; and a strong universe of buyers.

In the U.S., 80% of asset managers are still independent of banks and insurance companies. The large number of firms is the result of a ten-year trend driven by the huge demand for defined-contribution pension plans and low barriers to entry. Only five of the top ten asset management companies from 1987 are in the top ten today.

Pension assets--largely 401(k) plans--represent a huge slice of the asset management pie, said Owens. Businesses have coined the term "instividual market" to reflect the fact that defined contribution plans have both retail and corporate aspects. …

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