The global asset management industry continues to grow, and United States firms have emerged as the dominant players. Their share of the European market is also rising, surpassing that of European players. Does that matter for Europe?
Working on behalf of asset owners, such as pension funds and insurance companies, asset managers play a central role in the allocation of savings from households to productive investments. Differences in operational practise and culture between US and European asset managers can affect decisions on capital allocation.
These differences could have significant implications for the European Commission’s plan to create an integrated European Union capital market, the savings and investments union.
First, on environmental, social and governance engagement, European asset managers remain active, while their US counterparts increasingly vote against social and environmental resolutions. This is counterproductive for Europe’s sustainable finance agenda.
Second, asset managers have a home bias in investment allocation, meaning US asset managers may divert more of Europe’s investments to the US than European asset managers would. A bias towards US investments may hinder the goal of meeting Europe’s ambitious investment agenda, and will gain in importance if widely expected national pension reforms are implemented.
Third, the growing dominance of US asset managers raises questions about Europe’s ability to shape how its capital is allocated and stewarded. Strategic autonomy in this context should not be understood as protectionism, but as ensuring that Europe retains sufficient capacity to allocate and govern its investments in line with its economic and societal objectives.
The solution for the European Commission lies in strengthening stewardship policies and supporting its own capital markets.