A long list of asset managers are publicly-listed, including BlackRock, Jupiter, Legg Mason, Franklin Templeton, Aberdeen and Schroders. Old Mutual listed its asset management arm last year and Amundi is set for an initial public offering this year.
Shareholder pressure
Listed firms may be more focused on areas such as their own stock price and asset gathering than private fund houses, sources told Fund Selector Asia. It is curious that Fidelity and Vanguard, known for low fund management fees, are among the global giants that have remained private.
Public managers face pressure to boost earnings, for example through AUM growth, said Nerida Law, Mercer’s Asia head of equity research. Doing so in a way that does not affect the alpha-generation potential of successful products may pose challenges, she said.
Listed firms might also be inclined to deliver less volatile earning streams, she added. This could involve launching a broader range of products – perhaps beyond their original core competencies – or by acquiring other companies.
Publicly-listed asset managers do have a higher bar for transparency in certain areas, she said, and this can help investors understand their strategic business plans.
However, in some situations they may be unable to provide advance notice of an impending event because it is deemed sensitive to the share price.
“This may leave little time for us to analyse the impact of the news and provide guidance to clients on the action they should take.”
Quarterly scrutiny
Going public changes any company’s business culture, and Mercer must be comfortable that the firm has a strong investment culture that is conducive to retaining talented investment staff, Law said.
Moreover, the manager should not have unnecessary constraints imposed by a parent company or shareholders that may have limited understanding of the business, she pointed out.
Roger Bacon, Asia-Pacific head of managed investments at Citi Private Bank, also cited the commercial pressures on listed fund houses.
“Fundamentally, it shouldn’t make any difference [whether a manager is listed or not]. But there is evidence to suggest that when asset managers go public, there is increased scrutiny of AUM flow from quarter-to-quarter,” he said.
“That does suggest more of an instant gratification-type mindset: the inclination to get assets in the door this month to meet the budget.” This could serve as a distraction from managing assets for clients, he added.
However, such a mindset is less of an issue for large asset managers with diversified platforms and more of an issue for alternatives specialists, which might be charging 2% in management fees, he said.
“If a $100 billion alternatives business is taking in $200 million in management fees, people start to worry whether they have the same hunger [to strive for better returns].”
