Tthe European Union’s push into sustainable investing and worries over tensions between Beijing and Washington had all favoured doubling down on Europe, says an expert.INA FASSBENDER/AFP/Getty Images
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
Top U.S. investment management firms are going on a hiring spree in Europe as draconian anti-COVID-19 measures and rising geopolitical tensions have pushed them to redouble their search for growth outside China.
Major U.S. firms – such as Capital Group, J.P. Morgan Asset Management Inc., T Rowe Price Group Inc. and BlackRock Inc. – are planning to expand longstanding offices in Europe as they hunt for growth outside their home market.
China may be reopening but its fierce anti-COVID-19 measures, the European Union’s push into sustainable investing and worries over tensions between Beijing and Washington had all favoured doubling down on Europe, says Jonathan Doolan, partner at consultancy Indefi.
“That 1-2-3 punch ... meant that a lot of firms that had a global footprint are starting to re-examine Europe as a core area for them to succeed,” Mr. Doolan says.
“Europe remains an attractive market ... it is the largest institutional and wholesale market outside of the U.S. It also has a strong responsible investment focus, supported by the regulatory regime,” says Saker Nusseibeh, chief executive officer of Hermes Fund Managers Ltd., the London-based affiliate of the U.S. firm Federated Hermes, which has US$624-billion under management.
Bigger U.S. firms, which often have established offices in London and distribution networks on the continent, are being selective in their push further into Europe.
Germany, Austria, Switzerland, the U.K. and Nordic countries are particular targets, as is the region’s growing wealth market, say people familiar with the matter.
While regional competitors with deep roots offer specialized local products, U.S. firms think they have an edge because of their ability to sell access to global strategies.
Until recently, big U.S. firms looking to expand simply paid up – BlackRock bought Barclays’ investment arm BGI Group for US$13.5-billion in 2009 and Goldman Sachs Asset Management LP acquired Netherlands-based NN Investments Partners in 2021.
Now, however, “there’s an acknowledgment that a lot of it is going to need to be done organically or with small acquisitions,” Mr. Doolan says.
In order to bulk up, PGIM Inc. announced two senior hires in London in December, including a new role for a London-based global head of distribution.
Retail giant T Rowe Price, which has US$1.23-trillion under management, has grown its European operation from about 300 people in 2012 to more than 1,000 now.
Capital Group, which has US$2.2-trillion under management, has almost doubled its European staff in the past decade from 430 to 750 and will double its space in London when it moves to a new office next year.
PIMCO also announced it would open its first office in France this month.
Senior executives at Capital Group and T Rowe say that while they were keen to invest in Europe, they had never invested heavily in building onshore businesses in China.
“What we do in the U.S. is we distribute mutual funds to ordinary investors through financial intermediaries, that’s the bedrock of the business. So, the fact that we didn’t do it outside the U.S. always looked a bit odd,” says Hamish Forsyth, president for Europe and Asia at Capital Group, which first started building a business outside the U.S. about a decade ago.
Robert Higginbotham, head of global distribution at T Rowe Price, says the firm was hiring client-facing roles first in Europe and that Germany and Spain had been particularly profitable markets.
“We’re realistic – we’ve been on the ground on our own steam for 22 years but we know ... we’re not in the top five considerations in most markets. So, our plan now is really to double down on where we already exist. It’s about going deeper rather than broader,” Mr. Higginbotham says.
For J.P. Morgan Asset Management, subadvisory services – in which products are sold to savers via banks and other intermediaries – have driven growth in Europe, while the firm sees opportunities in alternatives and sustainable investing.
“Our European business is a core part of our business and growth strategy,” says Patrick Thomson, chief executive officer for Europe at J.P. Morgan Asset Management.
Nevertheless, he says, China remains key. “We have a long-established presence in China and we’re very committed to it. If you’re a global investor you can’t ignore China, no matter what the politics are.”
The top tier of U.S. alternatives managers such as KKR & Co. Inc. and Apollo Global Asset Management Inc., which have very successful wealth management businesses, are also looking to Europe and actively hiring as they expand private assets capabilities.
“Those ... shops are saying: we’ve already been in Europe for long enough, we know all the institutions that matter. Our next leg of the stool is going to be wealth, and we are not going to be encumbered by euros or dollars or pounds in terms of how much we can hire. We’re going to throw bodies at the problem until it solves itself,” Mr. Doolan says.
Additional reporting by Harriet Agnew
© The Financial Times Limited 2023. All Rights Reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied, or modified in any way.
For more from Globe Advisor, visit our homepage.