Asset Management.

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Société Générale And UniCredit: Two Different Strategic Approaches To Boost Commissions. 

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Author: Matthias Maucher

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Essential Insights.

 

Société Générale

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# integrated approach: building strong interfaces of asset management and custody business with wealth management and corporate clients. 

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Uni Credit

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# focus on distribution: partnership with Amundi Asset Management

# sale of Pioneer Asset Management is capital positive (CET1 + 78 bp)

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Distribution networks are a key success factor for asset managers.

Not surprisingly, asset managers with a reliable and manageable distribution network have an important competitive advantage. German real estate funds are a good example to highlight this. Deka, the savings banks' asset manager, and Union Invest, the counterpart for cooperative banks', manage real estate funds with 14 bio. euro and 11 bio. euro each. Together with Commerz Real and RREEF (Deutsche Bank) the four German market leaders in Real Estate Asset Management hold about 87% of managed assets.

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First-Movers transform their business into a client-oriented market platform offering high value services in addition to standard services.

Société Générale (SG) and UniCredit (UC) have both reorganized their asset management activities to better serve the market.

SG focuses on building an integrated product supply for its clients. Main traits of SG's approach are: 

1st: Integrating different operative units to offer a wide range of services such as derivatives business, covering trading, clearing and administration, including collateral management.

2nd: Combining asset management and custody business. Today SG is the second european custodian with 595 bio. Euro assets under administration. The combination of the two activities is driven by pure market concerns as regulation requires a strict separation of these functions.

3rd: Building strong interfaces of asset management and custody business with wealth management and corporate clients.

UC on the other side focuses purely on distribution. In December 2016, UC sold its Pioneer AM (226 bio. euro assets under management) for 3,86 bio. euro to Amundi AM. Also, the two players signed a strategic distribution partnership with UC acting as the distribution platform.

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Strategic Rationale.

SG and UC decided on different approaches to attract and serve their clients. SG acts as a manufacturer and distributor whereas UC will purely act as a distributor in the future. It is not publicly known to what extent this strategic decision is influenced by UC's recovery plan. 

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Throughout its recent reorganizations, SG focused on increasing the interaction of its business units. The goal is to better combine product and market power. Distribution units of different operational units were consolidated on bank level. Expertise centers were build for different tasks, such as performance and risk management. Those new units act as specialized service providers on a global level within SG. SG understands its asset management and custody business as an important pillar to serve wealthy clients and corporates. The business case clearly focuses on increasing stable commissions. Decreasing margins in the traditional funds business shall be balanced by additional high value services. The reorganization allows more flexibility on the markets and should positively impact the CIR.

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UC focuses on distribution and uses the sale of Pioneer Asset Management to Amundi also to reinforce its capital position (CET1 +78 bp). Amundi is a leading European asset manager, number 1 in France, 3 in Italy and Austria and with a strong position in Germany. The partnership with Amundi allows UC to make a clear shift to economics driven by distribution fee, instead of a manufacturing fee which suffers from strong competition, especially from passive funds.