Asset management: Moreau’s arrival underscores need for action at HSBC GAM

Nicolas Moreau’s arrival as chief executive of HSBC Global Asset Management (GAM) comes just days after Europe’s biggest bank removed its group chief executive, John Flint.

It is further evidence that chairman Mark Tucker wants outsiders to bring more radical change to HSBC: in this case the former head of Deutsche Bank’s asset manager DWS.

Despite previously running HSBC’s asset management division, Flint failed to tackle its problems decisively, even as group CEO.

The division is an irritation for HSBC, as it is at many other banks. While, in theory, it offers relatively high returns due to its low consumption of capital, in practice regulation and technology are a big challenge.

Bank-owned asset managers with between €500 billion and €1 trillion under management are particularly problematic. They are a squeezed middle: above niche players and highly profitable pure captive managers, but below the much larger and mostly American diversified asset managers that have better economies of scale.

BNP Paribas, Deutsche Bank, UBS and probably HSBC occupy this middle zone.

With about €450 billion under management, HSBC is closer to the niche and pure captive managers. Yet there is a sense in the industry that it punches well below its weight in asset management, especially in China, where UBS and even DWS are stronger.

Across Europe, most of the bigger and more diversified bank and insurer-owned asset managers want mergers – as this year’s aborted talks between DWS and UBS Asset Management have shown.

Even smaller niche players such as Intesa Sanpaolo and BBVA are looking to consolidate. However, this need for acquisitions, as UniCredit chief executive Jean Pierre Mustier points out, mitigates the extent to which asset management is capital-light.

For banks such as HSBC, asset management tends not to be a large enough part of their business to command the attention that big strategic deals would require.

It was UniCredit’s desperation for capital, coupled with Amundi’s status as Europe’s biggest asset manager, that created the exception of Crédit Agricole-owned fund house buying UniCredit’s Pioneer two years ago.

That said, given Flint’s background running HSBC GAM in the early 2010s, this is one area of the group that the former CEO should have dealt with head on.

External shake-up

Moreau’s appointment, coming so soon after Flint’s departure, suggests the lack of action in asset management was high on Tucker’s list of businesses that need an external shake-up.

Moreau has spent most of his career at French insurer AXA, whose asset management arm is another merger candidate. He left AXA for Deutsche Asset Management in 2016 and created the DWS brand to emphasise distance from bank.

He then designed a partial IPO in March last year, to make the division an easier vehicle for consolidation. Time will tell whether he will be able to replicate this approach at HSBC, where lifers Flint and then outgoing asset management head Sridhar Chandrasekharan both emphasised the link to the bank’s clients.

Due to disappointing fund flows in the US, and to a lesser extent in Germany, Deutsche summarily sacked Moreau last autumn, as DWS’s shares slid in the months after the IPO. His track record is not perfect – but this is Deutsche Bank, after all. At least he got things done.

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