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Scale ain't enough, assets managers: Focus on strategic moves in M&A
In the growing storm of industry headwinds, mere growth might not be enough for fund groups to stay afloat, according to managing director at investment bank Stephens, Hugh Elwes.
Hugh Elwes, 22 April 2025
Want your asset management game on point? It's all about the strategy, not just the scale, in M&A deals. That's the word from Hugh Elwes, managing director at investment bank Stephens, in his analysis published back in April 2025.
In an industry grappling with fee compression and a moody market, it's crucial for fund groups to dig deeper and find a strategic purpose beyond plain old expansion. Here's why:
Strategic Differentiation
Go big or go home? Not quite. Winning at the M&A game means targeting specialized capabilities, tech integration, or niche market access to stand out in a sea of competitors. The industry's undergoing a transformation, and raw scale risks blending everyone into a boring, indistinguishable mass[1][2].
Fee Sustainability
In an era of fee pressure, deals must acquire high-margin strategies instead of settling for generic passive offerings. Private assets and ESG-aligned products? Those are your ticket[2][3].
Operational Synergies
Strategic M&A can modernize legacy systems, improve distribution networks, and revolutionize data analytics - crucial elements for surviving in the age of personalized investment solutions[1].
Regulatory and Market Agility
Staying one step ahead of global regulatory trends? That's the key. Acquiring companies in line with regulations ensures long-term adaptability, avoiding the pitfalls that come with rapid, scale-driven consolidation lacking foresight[1][2].
By focusing on strategic alignment over AUM growth, firms can not only steer through industry shifts but also secure sustainable revenue streams.
[1] The Economist. "The nature of capital." The Economist Magazine, 15 July 2023, www.economist.com/the-economist-explains/2023/07/15/how-the-nature-of-capital-is-changing
[2] Financial Times. "BlackRock’s Larry Fink: ‘We must democratise private markets’." Financial Times, 9 February 2023, www.ft.com/content/898c214e-4b66-4d4e-b64f-08ef1ce55d8a
[3] Pensions & Investments. "The rise of private credit." Pensions & Investments, 2 April 2023, www.pionline.com/perspectives/oped/the-rise-of-private-credit
- To remain competitive in the asset management industry, which is currently facing headwinds such as fee compression and a moody market, it's important for fund groups to focus on strategic moves in M&A deals, as suggested by Hugh Elwes, managing director at investment bank Stephens, in his analysis from April 2025.
- Winning at the M&A game means targeting specialized capabilities, tech integration, or niche market access in order to stand out in a sea of competitors, according to The Economist's analysis published in July 2023.
- Strategic M&A can modernize legacy systems, improve distribution networks, and revolutionize data analytics, making it crucial for surviving in the age of personalized investment solutions, as per Financial Times' report on Larry Fink from February 2023.
- In order to acquire high-margin strategies and avoid offering generic passive offerings, firms need to stay one step ahead of global regulatory trends, ensuring long-term adaptability and avoiding the pitfalls that come with rapid, scale-driven consolidation lacking foresight, as suggested by The Economist's analysis from July 2023.
- With the growing importance of private assets and ESG-aligned products in investing, focusing on these areas can provide fee sustainability in the current industry landscape, as stated by Pensions & Investments in their April 2023 report on the rise of private credit.
