Last week, U.K. asset manager Schroders agreed to a £9.9 billion ($13.3 billion) cash acquisition by U.S. counterpart Nuveen. If completed, the merger will create one of the world’s largest asset managers, with combined assets under management of $2.5 trillion, and will mark the end of the Schroders family’s long-standing control of the firm.
Rather than simply signaling weakness in the City of London, the deal highlights the growing concentration of scale and distribution power in the United States.
“It is part of a global, structural trend that I don’t think is specific to the United Kingdom. People recognize that there are substantial synergies to having scale in asset management,” said Craig Coben, former global head of equity capital markets at Bank of America. “The U.S. has the largest and deepest capital markets in the world. It is not surprising that, against the backdrop of consolidation, U.S. players are doing much of the buying.”
A merger between two European firms might have achieved similar scale, but it would not have delivered the same access to U.S. distribution channels.
For a firm like Schroders, being neither a nimble boutique nor large enough to compete with U.S. giants such as BlackRock, with $14 trillion in assets, presents strategic challenges. The largest remaining U.K. manager, Legal & General, oversees roughly $1.34 trillion in assets, while Europe’s largest asset manager, Amundi, manages about $2.3 trillion.
“The top firms are all American,” said one London-based family office executive. “It’s a great shame that we haven’t got scale.”
According to Morningstar, U.S. firms manage $36.3 trillion, or almost 56 percent, of global net assets in open-end funds and ETFs.
Research by political economist Albina Gibadullina shows how deeply U.S. asset managers dominate global markets: they own 60 percent of U.S.-listed companies and 28 percent of all public companies worldwide, while BlackRock, Vanguard, and State Street together hold stakes in over 80 percent of U.S. firms. In the U.K., the imbalance is even sharper. British pension and mutual funds own just 9 percent of the domestic market, compared with 28 percent held by U.S. financial firms, meaning Americans now own a larger share of U.K.-listed equity than British investors themselves.
“M&A is in part a response to what firms want; they want more scale, lower costs, lower overhead, and more investment choice. Investment styles are driven by what clients are mandating,” Coben said.
From a strategic perspective, the deal has several positives, including geographic footprints that are complementary: Nuveen is heavily concentrated in the U.S., while Schroders has a broad client base across Europe, the U.K., the Middle East, and Asia. The deal was largely driven by distribution expansion and operational efficiencies.
Some critics say the transaction is the latest piece of bad news to hit the London financial markets. As part of the announcement, executives did suggest the Schroders brand would remain in place for the foreseeable future.
Not everyone is concerned.
“People tend to be worried about well-known brands from the perspective of nationalism,” said Roy Behren, co-CIO at Westchester Capital Management. “But when you have a very well-known and highly thought of brand like that, part of what you’re paying for is the name itself and you’re not going to just throw it away.”
He added that Schroders clients may even get better products and services. “You might find that post-acquisition, Schroders lowers expense ratios on its largest funds as a result of efficiencies realized by the transaction,” he said.
