Foreign Asset Managers To Gain Market Share As Concentration of Italian Funds
Market Intensifies

MILAN, Nov. 29 /CNW/ - RBC Dexia's latest report shows that Italian asset managers predict a wave of consolidation and rationalisation in the next two to three years that will lead to a much greater concentration of the sector, with foreign players widely expected to gain market share in the process. The research, carried out in partnership with Ernst & Young Italy amongst asset managers representing around 80% of Italy's assets under management, found that 94% of respondents expect market consolidation to continue in the short term and that 70% expect further concentration to result from the rationalisation of product offerings within large financial groups.

According to those interviewed, this trend will be motivated primarily by the pursuit of economies of scale (94%) and by the costs involved in implementing more stringent regulatory requirements (65%). The new capital requirements imposed by Basel III, in particular, are singled out as a potential driver for Italian banking groups to sell their asset management assets, which many respondents believe could be acquired by foreign institutions. More generally, increasing competition from non-Italian players is seen as a major challenge for the industry with almost all respondents (94%) expecting foreign products to gain market share in the next few years. Just over 80% of interviewees are concerned that investors could switch to foreign products because of their superior performance track record, which is now considered the most important factor for institutional investment decisions, ahead of an asset manager's experience or reputation (62.5% vs. 56.3%).

In order to remain competitive in this environment, asset managers are expected to reposition their business models by selling non-core or non-performing assets, and by resorting instead to outsourcing according to 69% of interviewees. This trend will be especially prevalent amongst medium-sized players according to our sample (86%). Respondents unanimously consider that fund administration presents the best opportunity for outsourcing, followed by IT support and back-office activities.

Commenting on the results, Paride Amiotti, Managing Director of RBC Dexia Italy, said: "Our report shows that we should expect a major restructuring of the asset management industry in coming years. Asset servicing firms will become key players in the investment value chain as funds become larger and rely more on outsourcing in order to be free to focus on their core business. Outsourcing will also help managers satisfy client demands for better quality and service, which almost 90% of respondents said was the greatest challenge they face in the current environment."

The report also points to some of the longer lasting effects of the crisis, revealing that while a cautious optimism has returned amongst Italian managers - just over half (53%) believe that the worst is behind them and that inflows will recover in 2011 - an overwhelming majority (94%) indicate that risk aversion has risen significantly. This reduction in investors' risk appetite is considered to be one of the most significant drivers for product innovation (47%), along with client demand for more flexible asset allocation (77%).

Respondents consider that, after strategic M&A, the expansion of distribution channels is the most important factor (60.6%) for asset managers seeking to raise assets under management, with institutional investors, retail investors and high net worth individuals being their main target clients. Just over half (53%) of those surveyed say they expect active investment management strategies to become more prevalent in the short term as funds seek to improve returns. Asset managers will favour equity, bond and balanced products, although our sample indicates that an increase in interest rates could favour equity investments over bonds. According to the research, the most promising investment destinations are deemed to be Asia Pacific (70.6%) and Latin America (52.9%). Alternative products are expected to lose out, however, with three quarters (76%) of respondents thinking it unlikely that there should be an increase in demand for alternative fund offerings in the near future.

Maurizio Grigolo, Ernst & Young Partner responsible for the Italian asset management market said: "In order to seize the opportunities rising after the financial crisis, the market reveals a pattern towards an asset management company model with leaner support structures, more efficient asset management and a growing focus on the investment dealer's and the final investor's needs. In this evolutionary background, due to a regulatory uncertainty related to the industry's fiscal reform, it is difficult to have a clear understanding of how Italian asset managers will be able to capitalise on the business development opportunities coming from the application of UCITS IV."

Download the full report

About RBC Dexia Investor Services
RBC Dexia Investor Services offers a complete range of investor services to institutions worldwide. Our unique offshore and onshore solutions, combined with the expertise of our 5,300 professionals in 15 markets, help clients grow their business and sustain enhanced performance through efficiency improvements and robust risk management practices.

Equally owned by RBC and Dexia, the company ranks among the world's top 10 global custodians with USD 2.7 trillion in client assets under administration.

www.rbcdexia.com            Join our LinkedIn group             Follow us on Twitter

About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

For more information about our organization, please visit www.ey.com

RBC Dexia Investor Services Limited is a holding company that provides strategic direction and management oversight to its affiliates, including RBC Dexia Investor Services Bank S.A., a credit institution licensed in Luxembourg by the Commission de Surveillance du Secteur Financier and the Ministry of Finance. All are licensed users of the RBC trademark (a registered trademark of Royal Bank of Canada) and Dexia trademark (a registered mark of Dexia Crédit Local) and conduct their global custody and investment administration business under the RBC Dexia Investor Services brand name.

For further information: