Amundi: scale whale

Amundi sounds like a mash-up of the French, Spanish and Italian words for world. That is intentional. The French fund management group running over €1.5tn of assets has grown by acquisition in the three countries over the past decade. On Tuesday, it announced another, buying the €23bn asset management business of Spanish bank Sabadell for €430m.

Investors cheered, driving Amundi shares up 3 per cent. That is fitting. Although smallish for Amundi, the purchase further expands its scale in Europe where it is one of the lower cost fund managers. It not only doubles Amundi’s assets under management in Spain but means its investment products will top the fund lists offered in Sabadell’s 1,900 bank branches. Two-thirds of retail funds in Spain are sold via banks, which are incentivised to direct customers towards Amundi’s products with a generous fee share. Sabadell could collect two thirds of the annual 150 basis point fee on a fund, say Berenberg analysts.

Amundi has been steadily hoovering up assets across Europe, including buying Pioneer Investments from Unicredit of Italy in late 2016 for €3.55bn. Its operations depend upon European banks’ ability to sell investment products and their desire for capital-lite growth.

Chart showing Amundi assets under management

The structural changes driving this trend should persist. Banks do not want the costs of running small asset management franchises. Selling to larger groups like Amundi also frees up capital. Amundi shares, currently at a 10 per cent discount to the sector on forward earnings, consequently look undervalued. Distribution agreements with Amundi’s acquisitions ensure a steady flow of assets. Sabadell’s will last a decade.

Amundi executives seem to speak the language of industrial groups, shunning big bonuses and keeping costs low. As a proportion of assets under management operating costs were 10 basis points at the end of 2018. Schroders were 32 basis points. Asset management is increasingly about scale and low costs. Amundi is thus well positioned to remain Europe’s leader. 

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