UBS is said to weigh asset management deals in bid for scale
UBS Group is weighing acquisitions and joint-ventures for its asset management business to help it compete with larger rivals, people with knowledge of the matter said.
Targets may include U.K. and U.S. asset managers focused on retail clients and specialized asset managers in areas such as real estate, the sources said, asking not to be identified because the deliberations are private. Senior executives at the Zurich-based bank think the $800-billion asset manager needs more scale to compete internationally, two of the people said. The bank is unlikely to make any single very large acquisition, the people said.
Building scale has become a key topic for asset managers across Europe amid sustained pressure from larger, more technologically-advanced U.S. rivals who can undercut its fees. Recent consolidation in the industry included the combination of Standard Life Plc and Aberdeen Asset Management Plc. UBS has enough capital to consider deals again after shunning acquisitions, the people said.
UBS declined to comment.
Asset management unit head Ulrich Koerner has been overhauling the unit since 2014, disposing of assets and pushing into passive-strategy products, which now account for almost 40% of assets managed. That’s helped reverse outflows, although it has reduced margins. Pre-tax profit in the six months through June was lowest in two years and less than 5% of UBS’s total.
Koerner recently hinted that the unit could consider deals after not being in a position to do so for years, though the principal strategy remains organic growth, he said. He expects companies managing between 50 billion and 500 billion Swiss francs are most likely to be bought as the industry consolidates.
“This is a chance to redesign core systems, some of which go back to PaineWebber,” says Tom Naratil, president of UBS Wealth Management Americas.
Clients have filed hundreds of similar claims against UBS since 2013, with aggregate damages of $2.6 billion.
Sergio Ermotti is under pressure to show investors how the bank can reap greater profits from a merger of its two wealth management businesses.
Koerner deepened job cuts earlier this year. The unit eliminated at least 100 positions in areas including distribution, one of the people said, asking not to be identified because the cuts are private.
Still, UBS is one of the few European asset managers, along with France’s Amundi, that took in fresh money in the three months through September. Companies including Jupiter Fund Management, DWS Group and Switzerland’s GAM Holding, saw outflows of client money, though GAM’s struggles are tied to the suspension of a star fund manager.
Deutsche Bank’s DWS has struggled this year to replace billions of dollars of assets repatriated by U.S. clients after last year’s tax reform. The company said last week that CEO Nicolas Moreau will be replaced, after it reported worse-than-expected outflows in the third quarter.