Global Asset Management Industry Research Articles

Legitimacy and the extraordinary growth of ESG measures and metrics in the global investment management industry

ESG metrics are increasingly important in the global investment management industry. Why this came to pass given the limited appetite for responsible investing in the industry is the subject of this paper. Although the business case for ESG provides an explanation for its increasing uptake whereby market actors are increasingly convinced of the merits of ESG as a profit centre, this explanation is insufficient. By contrast, the adoption the ESG programme offers a means of rewriting the terms of risk management and value creation that while grounded in the business case also serve to address challenges to the legitimacy of the global asset management industry. These developments are illustrated in a case study of the establishment and growth of TruCost and its purchase by S&P Global in 2016.

Ownership and corporate governance across institutional contexts

AbstractResearch Question/IssueThe purpose of this special issue (SI) is to encourage research examining the effect of different ownership types in and from different countries on corporate governance and objectives.Research Findings/InsightsThe articles included in this SI provide novel insights as to the influence of different types of owners, including states and sovereign wealth funds, families, and different types of institutional investors, as well as of other features of ownership structures, on various aspects of corporate governance, in a variety of institutional contexts.Theoretical/Academic ImplicationsAs companies face different institutional contexts when they operate internationally, and shareholders have become increasingly global, the resulting heterogeneity of shareholder types poses new challenges in our understanding of their behavior. This SI is a step in the direction of disentangling the complex implications of ownership for corporate governance across institutional contexts.Practitioner/Policy ImplicationsTogether with other owner types, the ever‐increasing $100 trillion global asset management industry representing 40% of global market capitalization (PwC, 2020) fuels corporate governance and performance pressures on portfolio companies. The articles included in the SI provide useful insights as to the new ownership landscape and its consequences for operating firms in different countries.

Tax Evasion and Market Efficiency: Evidence from the FATCA and Offshore Mutual Funds

Using the Foreign Account Tax Compliance Act (FATCA) as an exogenous shock that reduces the tax advantages of offshore funds sold to U.S. investors, we document that affected funds significantly enhance their performance as a response. This effect is stronger for funds domiciled in tax havens and for skilled funds with low flow volatility. Moreover, in generating additional performance, FATCA-affected funds also increase the price efficiency of their invested stocks. Our analysis has important normative implications in showing that curbing offshore tax evasion could help improve efficiency in both the global asset management industry and the security market

The role of banks and the state in the shaping of the French fund industry

The article deals with the issue of the French financial system design based on a historical analysis of the development of the fund management industry. It recounts how the main banks have become leaders in the global asset management industry. This success relies on a long-term institutional evolution towards a hybrid model and the ongoing close relationships between banks and the State since the end of World War II. The establishment of a friendly institutional framework for the bank intermediation expansion was rooted in the seizure of power by reformist civil servants in the late 1950s and the early 1960s, who would later become heads at the Treasury and the main banks. We also argue that the State’s ability to develop new forms of interventions, especially during financial liberalization and European construction, has been crucial in the development of a competitive fund industry. Finally, we show that the State’s and banks’ interests have driven the hybridization process of the fund sector and that the fund sector serves primarily the State’s interests and the funding needs of the financial sector at the expense of the real economy.

Is the Global Asset Management Industry Ready for a Revolution?

The purpose to this article is to introduce a critical overview of asset management industry and the challenges it faces. Its organisation and ethos is still governed by ideas emerging from research made in 1950s. It totally ignores the massive global changes the world experienced since the last twenty years. This paper also suggests different alternatives as possible solutions to investigate. It focuses especially on the pervasive epistemological stance governing the decision making processes in the global asset management industry.

The Contribution of the Asset Management Industry to Long-term Growth

The global asset management industry was severely hit by the worldwide financial crisis, but has recovered well from the crisis. The resiliency of the asset management industry can be explained by a more diversified industry and investors turning to greater diversification in asset classes. The asset management industry is a vital source of economic growth as intermediary in the savings-investment channel. The industry is also one of the most important providers of liquidity needed to ensure smooth functioning of capital markets and provides the means for its clients to diversify their portfolios and achieve their investment goals. Asset managers should act as the ‘stewards’ of their clients’ interest. But less ‘sticky’ liabilities tend to create short-termism of asset managers. A sound governance framework, more transparency, better communication with clients and better management of their expectations may be needed to overcome this problem. But clients themselves, at the institutional as well as retail level, will also have to adopt a more long-term view to appropriately evaluate the risk and returns of their portfolios. Vehicles for longterm retail investment need to be developed and support by fiscal and other incentives may be considered.

Growth in the Global Institutional Asset Management Industry: Structure, Conduct, Performance

This article examines the industrial organization and institutional development of the global asset management industry. It identifies the key components of the “buy side” of financial markets in terms of its four principal domains: pension funds, mutual funds, discretionary alternative assets, and insurance companies. It points out that various kinds of financial firms have emerged to perform asset management functions: commercial banks, savings banks, postal savings institutions, savings cooperatives, credit unions, securities firms (full-service firms and various kinds of specialists), insurance companies, finance companies, finance subsidiaries of industrial companies, mutual fund companies, hedge fund financial advisers, and various others. Members of each strategic group compete with each other, as well as with members of other strategic groups. The article addresses two key questions. First, what determines competitive advantage in operating distribution gateways to the end investor? Second, what determines competitive advantage in the asset management process itself?

Henderson Global Investors

In March 2001, the chief investment officer of this U.K.-based asset management company is reflecting the firms dramatic transformation in the 1990s and how it must continue to adapt in the future. Ongoing forces of change in the industry compel a careful re-examination of the firms strategy and structure. Three discrete issues are addressed: a) the extent of centralization versus decentralization; b) the location of equity analysts (centrally in London or on the ground around the world); and c) the suitability of Hendersons top down, theme-based approach that emphasizes sector analysis. The case can be used in both executive and degree programs as a program opener, because it raises many themes and creates a sense of drama about the strategic turbulence within the industry. This case helps set the stage for more detailed case problems and motivates students to examine carefully any assumptions about the evolution of the global asset management industry. Three chief lessons emerge from the discussion: (1) Corporate transformation is driven by strategic turbulence in the industry. Understanding the sources of turbulence as a foundation to setting strategy and designing the structure of an organization is necessary. In this industry, key sources of turbulence are globalization, technological change, deregulation, increasing integration of capital markets, and demographic change. (2) Core competencies are a useful focal point in considering the design of strategy and organization. Traditional strategic planning is focused market position. More recent approaches employ analysis of core competencies that create strategic advantage. The main question for Henderson is how to exploit the competencies it now has and how to build new ones. (3) Change leadership is, in essence, process management.

The Global Asset Management Industry: Competitive Structure and Performance

The asset management industry represents one of the most dynamic parts of the global financial services sector. Funds under institutional management are massive and growing rapidly, particularly as part of the resolution of pension pressures in various parts of the world. The industry is not, however, well understood from the perspective of industrial organization and international competition, which is the focus of this paper. It begins with a schematic of asset management in a national and global flow‐of‐funds context, identifying the types of asset‐management functions that are performed and how they are linked into the financial system. It then assesses in some detail the three principal sectors of the asset management industry—mutual funds, pension funds, and private‐client assets, as well as foundations, endowments, central bank reserves and other large financial pools requiring institutional asset management services. Relevant comparisons are drawn between the United States, Europe, Japan and selected emerging‐market countries. This is followed by a discussion of the competitive structure, conduct and performance of the asset management industry, and its impact on global capital markets.