UBS Chief Executive Sergio Ermotti is coy about whether the Swiss bank would bid for Deutsche Bank's asset management division it it came up for partial sale. But the industry is changing.
UBS CEO Sergio Ermotti made it clear that he would not comment on a report that Frankfurt-based Deutsche Bank may have to offload part of its asset management division for capital-building purposes, in an interview with «Bloomberg».
Ermotti wouldn't comment on whether UBS would look at an acquisition of the unit, but he did elaborate on the conundrum facing big banks with asset management divisions.
Asset management has grown far more competitive as clients shift more funds to passive managers, which are cheaper than active managers and aim to match an index performance.
Janus-Hendersen Deal
This leaves active managers with little choice but to bulk up – the $6 billion merger of fund houses Janus and Hendersen being the most recent and prominent example.
«The asset management industry is an industry that is becoming very competitive and it's likely to see more consolidation, so we look at first of all making our business more efficient and effective,» Ermotti said.
Meanwhile, passive fund managers including Blackrock-owned iShares unit are cutting prices ahead of a U.S. rule requiring brokers who sell retirement products to put clients' best interests ahead of their own profits.
Price War
iShares, Vanguard, Charles Schwab and Fidelity Investments have been waging a price war in exchange-traded funds in recent months.
What does this mean for Ermotti and UBS, where an asset management arm is dwarfed by a flagship private bank and a scaled-back investment banking unit?
«It’s true that we’re going through a redefinition of our asset management strategy. We are doing well in terms of having achieved our targets,» he said.
UBS Asset Management Deals?
UBS decided in 2013 to keep its asset management unit, after unsuccessfully trying to peddle it to a trade buyer under previous management.
Under unit head Ulrich Koerner, UBS set a mid-term 1 billion Swiss franc profit target – it made 600 million francs last year – and vowed to sell more equity, hedge fund, and real estate products to wealthy and institutional clients like pension funds.
«We look at first of all making our business more efficient and effective, and eventually, we can’t rule out anything, but...I think our base option is to grow organically,» Ermotti said.