Mutual fund shareholders' woes stemming from revelations of endemic misconduct amounted to a windfall for investment bankers. The pace of consolidation within the asset management industry continues to accelerate under the weight of massive regulatory investigation, according to a new study by Putnam Lovell NBF Securities.
Putnam Lovell's study partially attributes the upturn in asset management sales to 137 in 2003 from 111 during the previous year to added regulatory costs nudging smaller investment firms onto the block. Smaller deals accounted for the bulk of asset management transactions last year. This year also promises lofty profits for the investment bankers.
The news is like desert oasis to investment banking groups that were hit hard by the market downturn in 2000 and in many cases resorted to painful layoffs. "The boardroom buzz has never been louder," said Donald H. Putnam, co-founder and CEO of Putnam Lovell. ``We expect another year of controversy and reaction."'
New industry regulations are also helping to boost the values of smaller asset management firms by attracting assets from investors who retreated during the past bear market and stayed away during the scandals. Revenues from deals surged last year but assets under management among companies involved in the transactions plummeted to $430 billion, a level not seen since 1996.