Investire | April 2022

The love story between Italian financial networks and asset management companies began a long time ago, evidenced by the mass advent of foreign AMCs in Italy over the past twenty years.

Back in 2005, financial advisors were willing to work with only 3 AMCs. By 2015, the number had increased over fivefold, reaching 17. But, in 2020 and 2021, the number decreased.

At the same time, in Italy the amount of assets under management keeps growing, achieving a new record every year – today, we have reached over €2.580 million. Financial advisors are certainly the fiercest champions in this field.

How should these figures, apparently at odds, be interpreted? Less AMCs in the hearts of financial advisors, but an ever-growing number of assets managed by AMCs?

The reasons behind such paradox are many. The first and more obvious reason is the concentration of the sector, typical of mature markets in which the competition inevitably increases while the margins decrease.

In addition, there is an external factor: negative interest rates.

To make matters worse, two other suitors have arrived at the altar of financial consultancy: ETFs and, more recently, alternative ones. ETFs will, with all probability, ruin the party of AMCs, especially the smallest and least consolidated ones.

What about the volatility of the markets? Volatility showed, so to speak, its nails in the past and, with the invasion of Ukraine, it has started to bite.

Active managers find profiting from the markets increasingly difficult, also but not only because of the dramatic events of the war.

What could give some oxygen to AMCs (small or big)? Currently, AMCs are being strangled by a distribution system that reduces the margins and seems to be betting more and more on delegating management and home AMCs.

Net of performances, which depend on both managers and the market, we would like to provide some advice to those who want to remain on the market and maybe resume growing.

The first advice is focusing on the quality of service to distributors; in fact, the role of advisory and sales support of third-party AMCs is crucial.

It is no coincidence that, among the heavyweights of international asset management, for the most part star-spangled, some Italian AMCs and some Swiss outsiders have managed to carve a space for themselves.

The second is the ability of AMCs to stand out. In times of concentration of the sector, being generalist and with no distinctive features or strengths respect to competitors can prove very dangerous.

AMCs are today between the risk of the distribution and the hard place of the markets. In fact, while the markets withstood the pandemic, they have started to shake under the weight of the Russian invasion of Ukraine.

In order to avoid being backed into a corner by the external and internal issues of the sector, some of the brightest AMCs seem to have found two possible escapes (or, at least, alternative) routes.

The first is disintermediation: that is distributing products directly to end investors, maybe through an internal financial network or platforms.

This would be no news, one need only think of Vanguard, which launched this model in the USA and has today reached Europe.

The second solution is betting on unlisted asset classes, private equity, and private debt, thus escaping, for now at least, the yoke of financial markets. However, sooner or later they will have to be faced.

Nicola Ronchetti