Fight for investors: French challenge Deutsche Bank

Battle for investors
French challenge Deutsche Bank

From Stefan Schaaf

The consolidation of the European fund industry is picking up speed. After Amundi’s purchase of Lyxor, the ball is now with Deutsche Bank subsidiary DWS

With the acquisition of the competitor Lyxor Asset Management, Amundi is getting the consolidation of the European fund industry going. The ball is now with the Deutsche Bank subsidiary DWS, whose boss Asoka Wöhrmann has the green light for acquisitions according to the Bloomberg news agency.

Amundi announced on Wednesday that it would take over Lyxor from Société Générale by February 2022 for a total price of 825 million euros. Lyxor was founded in 1998 and manages assets of 124 billion euros, of which 77 billion euros in passive, exchange-traded index funds (ETF). Amundi, based in Paris, is 70 percent owned by the major bank Crédit Agricole.

With the takeover, Amundi would itself take a huge leap forward in the European ETF business. The combined business would come to a market share of 13.7 percent according to data from Morningstar.

However, there would be a long gap to the market leader iShares, a Blackrock subsidiary. It accounts for almost 43.6 percent of the ETF business in Europe. However, Xtrackers, the passive division of DWS, is coming under pressure. It is currently number two in Europe with a share of 11.2 percent – making it the largest provider of exchange-traded index funds on the continent.

After the merger of Amundi and Lyxor, which also includes the former Commerzbank division Comstage, DWS would fall back to third place. UBS is currently in fourth place with a share of 6.3 percent. The ETF providers Vanguard and State Street, which are important in the USA, play a subordinate role in Europe, as do Deka and Wisdom Tree, for example.

Together, DWS and UBS could regain second place. The asset management division of the major Swiss bank had already been named as a merger partner of DWS in the past. According to Bloomberg, the asset management of competitor Credit Suisse could also be put in the shop window after the Archegos and Greensill scandals. “We want to play an active role in the consolidation, but not at any price,” a DWS spokesman told Capital.

This could be an indication that Lyxor was considered too expensive. When Deutsche Bank floated a fifth of DWS three years ago, it set the goal of becoming one of the top ten in the global fund industry. With assets under management of 793 billion euros at the end of 2020, DWS was only in 17th place and, according to industry experts, can only make it into the top ten through organic growth.

DWS is growing faster

As Bloomberg reported, DWS boss Wöhrmann not only received the green light for acquisitions. Deutsche Bank is also ready to melt its 80 percent stake if DWS issues new shares in the course of a takeover, the news agency reported, referring to people familiar with the matter. The DWS did not deny this.

However, DWS is growing significantly faster than many of its competitors in the ETF business. According to the Morningstar data, in the twelve months to March 31, 2021, it was able to combine a good 15 percent of the net inflows totaling 139 billion euros. Lyxor and Amundi grew significantly weaker, Lyxor was even outperformed by State Street in terms of net new business. Lyxor has long been very strong in the swapped ETF business, but these have lost ground to physically replicating index funds. In the case of swapped ETFs, the securities from the index are not necessarily found in the fund; their performance is guaranteed by derivatives.

Meanwhile, the acquisition could make sense for Amundi to move its own ETF division out of midfield. The ETF business is very competitive and accordingly low in margins. Size is therefore an important factor in this still growing segment. However, there may also be an industrial policy plan behind the intra-French merger. Amundi would strengthen its role as one of the leading European fund providers – and that from Paris, which is eager to suck business from London after Brexit.

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