Is Consolidation Changing Asset Management dynamics?
Pioneer Investments Press Forum
Giordano Lombardo | November 29th
CEE, a key strategic area for Pioneer Investments
Local Asset Management Poland Czech Rep Croatia Hungary Romania Luxembourg Fund Distribution Bulgaria Czech Rep Hungary Slovakia Slovenia Turkey 3rd Party Distribution Bulgaria Czech Rep Croatia Hungary Slovakia
Source: Pioneer Investments, as of 30/9/2006
Assets Under Management
€ 7.7 bn
Head Count
282
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We have achieved a dominant position across the region
Pioneer in Czech
Started in 1995 Total assets (Euro mio) 500 Local funds, Pioneer offshore funds Sales thru Zivno Banka (UC), HVB CZ, IFA’s and direct
Pioneer in Poland
Started in 1992 Total assets (Euro mio) 5,500 Full range of local products incl. e.g. clones of Pioneer Fund, High Yield Fund, Core European Fund
Pioneer in Slovakia
Started in 2001
Warsaw
Pioneer in Bulgaria
Started in 2003 Total assets (Euro mio) 41 Introduced UCITS funds to the market together with Bulbank , largest Bank in Bulgaria. Sales extended to enlarged UC banking group ( HVB Biochim / Hebros).
Total assets (Euro mio) 80 Lux Pioneer Funds, Lux New Europe Funds, other Pioneer offshore funds
Prague
Bratislava Budapest
Pioneer in Croatia Started in 2002
Total assets (Euro mio) 580 Local funds; local Fund of Pioneer Funds with ZB Invest, plus subadvisory mandate
Ljubljana Zagreb
Bucharest
Pioneer in Hungary
Started in 1992 (CAIB) Total assets (Euro mio) Launched first investment fund in Hungary 950
Sofia
Pioneer in Romania
Started in 2005 Total assets (Euro mio) 13 Local funds; first fund to invest in nonRomanian securities
Pioneer in Slovenia
Started in 2005 Total assets (Euro mio) Pioneer offshore funds 51
Pioneer in Turkey
Started in 2004 Total assets (Euro mio) Pioneer offshore funds 11
Source: Pioneer Investments, as of 30/9/2006
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The CEE economic potential is huge
High GDP growth Increasing levels of Household Financial Wealth
GDP Growth (right scale)
2000 2005 2008F
Household Financial Wealth
10%
200
8%
€ Billions
150
6% 5% 5% 4% 4% 5%
6% 5%
6%
GDP Growth
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100
4%
50
2%
0 Bulgaria Croatia Czech R. Hungary Poland Romania Slovakia Turkey
0%
Source: New Europe Household Wealth Monitor Mar 2006, UniCredit /PGAM estimates
…and the investment fund assets are still relatively low
Fund Assets Per Capita in Europe* – as of 30/06/2006 (EUR)
25000
23 032 20 623 19 646 18 995 15 847
20000
15000
13 461 11 720 11 700 11 432 9 982
10000
7 802
6 805 6 694
5 898 3 588 2 248 665 505 499 493 198
5000
Czech Republic
Germany
Denmark
Portugal
Slovakia
Sweden
Belgium
United Kingdom
Austria
Netherlands
France
Switzerland
Finland
Hungary
Norway
Ireland
Greece
*Without: Luxemburg, Liechtenstein, Source: EFAMA, GUS
Poland
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Turkey
Spain
Italy
0
From a global insight to European Colloquia
Global investments, sales and marketing centre Local investments, sales and marketing centre Sales and marketing centre
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In Europe a "national champion" model still prevails
France
Asset Manager
Crédit Agricole Société Générale BNP Paribas Groupe
Mkt Share
19% 12% 9%
Nationality
Italy
Asset Manager
Eurizon/San Paolo Pioneer Investments Crédit Agricole/Intesa
Germany
Mkt Share
18% 15% 14%
Nationality
Asset Manager
DWS DEKA Union
Mkt Share
22% 18% 16%
Nationality
Spain
Asset Manager
BSCH BBVA La Caixa
UK
Mkt Share
25% 18% 5%
Nationality
Asset Manager
Fidelity Investments Invesco Threadneedles
Mkt Share
8% 6% 5%
Nationality
Source: EuroPerformance, Strategic Insight, BVI, Inverco, Assogestioni, Investment Management Association. Data as at September 2006
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Many sub-scale players still dominate in a fragmented market
France
Asset Manager
TOP 3 Other Total
Cumulated Share
40% 60% 100%
Number of Players
3 236 239
Italy
Asset Manager
TOP 3 Other Total
Cumulated Share
47% 53% 100%
Number of Players
3 76 79
Germany
Asset Manager
TOP 3 Other Total
Cumulated Share
56% 44% 100%
Number of Players
3 86 89
Spain
Asset Manager
TOP 3 Other Total
Cumulated Share
48% 52% 100%
Number of Players
3 98 101
UK
Asset Manager
TOP 3 Other Total
Cumulated Share
19% 81% 100%
Number of Players
3 106 109
Source: FERI Fund. Data as at September 2006
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Dominant trends need the asset managers to rethink their business model
Opening platforms Retirement issue Commoditization Demand for innovation Regulatory changes
How is consolidation going to influence them?
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M&A is material in Europe
M&A activity in asset management in Europe
400000 350000
AUM acquired ($ mln)
43 40 36 36
45 40 30
Nr. Of Transactions
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300000 250000 200000 150000 100000 50000 0 2002 2003
AUM Acquired
35 25 20 15 10 5 0
24
2004
2005
Nr. Of Transactions
2006
Source: Putnam Lovell NBF Securities Inc and PGAM estimates. Data as October 2006
M&A: opportunity or risk?
Costs of complexity: information flows, more than proportional
increase in operational tasks
Margins may not increase with scale: economies of scale on
the cost side; more controversial on revenues
Acquisitions may weaken factors that make a company unique
– Culture clashes – Increase organizational entropy – Dilution of investment processes Barriers to entry relatively low and market shares unstable
M&A is going to change the framework for asset managers and partners/distributors
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Managing M&A successfully is possible
Pioneer US
+203 % AUM growth since 2000 ($ bln)
70 60 50 40 30 20 10 0
2000 2001 2002 2003 2004 2005 2006 YTD
Momentum*
AUM grew by 250% since acquisition in 2002 (€ bln)
5
59,8 51,2
Vanderbilt
AUM grew by 42% in the last 6 months ($ bln)
20
+203%
+350%
4 3,3
4,5 4,2
16
+42%
12,5 12
17,7
34,1 27,6
3 2 1,9 1,0 1 0 2002 2003 2004 2005 2006 YTD
8
19,7 19,2 18,5
4
0
Apr-06 Oct-06
Source: Pioneer Investments. Data as at October 2006 * include Momentum Funds and PAI Sgr
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A global/integrated model is key to create value for the clients
Retail Proprietary Third Party Distribution Institutional/Wholesales HNW/Private Banking
Values
Brand
Pioneer Mutual funds Investments Hedge funds integrated Segregated accounts model Guaranteed
products Asset allocation Pension products
Culture
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Integrated to deliver consistent results
US Equity Funds: 5 stars funds 2002-2006
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2003
1 Star 2 Stars
Only 15% of funds keep their 5 star ratings About 70% of them are managed by global players
2004
3 Stars
2005
4 Stars 5 Stars
ott-06
Source: Pioneer Investments on Morningstar data. Morningstar US Domiciled US Equity funds data as at October 2006.
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Integrated in the value chain with partners
Asset allocation Multi management Retirement Market analysis/trends Innovation Remuneration Training Road show Intranet Reporting Performance analysis Portfolio Evolution
Distributors
Customer care programme
Pioneer Investments
Understanding needs
Product design
Tools for advice
Sales support
Post sales/ Maintenance
Customization Client satisfaction analysis
Internet Below the line Above the line
Clients
Shareholder Communication
…able to address a more gate-keeper-centric model…
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Integrated in corporate culture
Governance & Org. structure
Independent Directors in Board and Audit Committee Centralized Compliance/ Risk Management Actively managed matrix organization
HR Management
Build an international leadership pool Develop and reward key talented people Design retention tools aligned with the new market challenges
Values
Emphasis on research “Entrepreneurial” culture in the business approach Accountability for results Change management
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Independent research to address the new challenges
Trends in Savings and Wealth – Areas of Interest and contents
http://www.savingsandwealth.com
Macro trends in household savings and wealth Convergence/divergence across countries Cyclical vs. secular movements Investor Micro-behaviour Investor attitudes towards risk Household portfolio diversification and efficiency Motivations for saving Segmentation of investor behaviour Demography and retirement issues Forum on risk Papers of broad and general interest
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…and to feed the debate on value creation in the long term
FEATURES hosts contributions and forums on selected themes
RESEARCH hosts basic and independent research working papers
EVENTS hosts information on upcoming events and conferences
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