U.S. financial giants BlackRock and Vanguard exert considerable influence over Europe's investment landscape, spearheading a creative dominion dubbed the 'super league.'
In the past decade, US asset managers have established a significant presence in Europe's expansion and growth, outperforming local rivals. The dominance is primarily attributed to four key factors: a larger capital base, advanced digital and fintech capabilities, global market accessibility, and robust financial strength.
One of the significant contributing factors is the scale and capital strength of major US financial institutions. For instance, JPMorgan Chase boasts a high Tier 1 capital, a key measure of financial resilience, far exceeding regulatory minimums. This strong capital backing provides US asset managers with a significant advantage in funding capability and risk absorption compared to many European peers.
Another key factor is the technological innovation and fintech leadership of US firms. The US benefits from a more mature fintech ecosystem and larger fintech funding, with nearly half of all global fintech funding secured in 2020. This technological edge supports expansion and tailored offerings that attract European investors.
Global market accessibility and diversification also play a crucial role. US asset managers have developed broad product lines and capabilities for overseas assets, easing cross-border investment. This global access responds to increased demand from European clients for diversified portfolios, positioning US firms as more versatile than local rivals constrained in their domestic markets.
The scale of deals and investment volume is another area where US managers have thrived. European fintech and asset management markets are marked by larger deal sizes and ongoing investor interest, areas where US managers have leveraged their capital and digital tools to dominate.
Despite the dominance of American asset managers, European players like UBS, Amundi, and DWS still hold a significant share of the domestic mutual fund and ETF market. Notable US groups, such as BlackRock, Vanguard, and JPMorgan Asset Management, have more than doubled assets under management in Europe and the UK over the past decade, outstripping the growth of local rivals.
As of the end of May 2021, these American fund groups oversaw a combined $4.9tn in the region. France's assets under management grew from $870bn to $1.5tn over the same period, while Switzerland's assets under management each roughly doubled to $1.4tn. The UK sector's assets under management rose from $1.2tn to $2tn over the same period.
The persistent dominance of American asset managers comes as big investors are seeking to diversify their portfolios, including greater exposure to assets outside the US. Onur Erzan, head of AllianceBernstein's global client group, predicts a limited number of 'winners' in the world of active, with passive funds charging ahead. George Gatch, chief executive of JPMorgan Asset Management, sees an opportunity in active investment strategies due to the rise of cheap passive funds.
Investors continue to value BlackRock's insights and services in managing their portfolios, with the firm overseeing $1.4tn in ETFs and index tracker funds in Europe and the UK. Sarah Melvin, head of BlackRock's European client business, noted that investors value BlackRock's insights in both public and private markets while navigating recent market volatility.
Vanguard, which only opened its London office in 2009, manages $442bn in Europe and the UK. Felix Wenger, senior partner at McKinsey, stated that US asset managers have led growth in faster-growing asset classes such as passive and private markets. Jon Cleborne, head of Europe for Vanguard, mentioned a shift in Europe towards low-cost options in passive investing.
Being headquartered in the US is an advantage, allowing companies like AllianceBernstein to build a global franchise that feeds into their businesses in other regions, such as Europe. Being based in the US also allows these companies to tap into a vast pool of capital and technological resources, giving them an edge in the competitive European market.
In conclusion, the combination of strong financial foundations, technological leadership, and global reach allows US asset managers to outperform and expand effectively in European markets, surpassing less capitalized and less digitally advanced local rivals over the past decade.
- The advanced digital and fintech capabilities of US firms offer an edge in attracting European investors, considering the US's more mature fintech ecosystem and larger fintech funding.
- JPMorgan Chase's high Tier 1 capital, a key measure of financial resilience, provides US asset managers with a substantial advantage in funding capability and risk absorption compared to many European peers.
- Investors looking for diversified portfolios prefer US firms due to their broad product lines and global market accessibility, positioning them as more versatile than local rivals confined to domestic markets.
- Notable US asset managers like BlackRock, Vanguard, and JPMorgan Asset Management have significantly increased assets under management in Europe and the UK over the past decade, outperforming local competitors in terms of investment volume and deal sizes.
