Global banks, forced by regulators to reduce their dependence on profits from high-risk trading, have rediscovered the appeal of the mundane business of managing money for clients.
Bloomberg reports that Deutsche Bank is now counting on the fund unit it failed to sell to help boost return on equity, a measure of profitability. UBS is paring investment banking as it focuses on overseeing assets for wealthy clients. Goldman Sachs, JPMorgan Chase and Wells Fargo, three of the five biggest U.S. banks, are considering expanding asset-management divisions as they seek to grab market share from fund companies such as Fidelity Investments.
'Asset management is a terrific business', said Ralph Schlosstein, CEO of Evercore Partners Inc., a New York-based boutique investment bank that last month agreed to buy wealth manager Mt. Eden Investment Advisors LLC. 'Asset managers earn fees consistently without risking capital. Compare that to other businesses in the financial services'.
Banks will need to overcome the perception that they sometimes push their own funds and improve their middle-of-the-pack performance as money managers if they want to attract assets from investors. Goldman Sachs’s stock and bond mutual funds have trailed about 61% of their respective peers on average over the five years ended September 30th, and about 52% over the past three years, according to data from Morningstar Inc. in Chicago. JPMorgan’s mutual funds have been beaten by 42% of rivals over the past five years, while Wells Fargo’s have lagged behind 44%, the Morningstar data show.
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