Charles Schwab, Amundi and Xtrackers have been flagged as possible bidders for Lyxor Asset Management which Société Générale is reportedly offloading.
Reuters reported earlier this week that France’s third-biggest bank had hired Citigroup to oversee the sale, which was expected to kick off in the fourth quarter. The possible deal was intended to shore up the finances of the French lender, sources suggested.
Société Générale declined to comment, telling Portfolio Adviser sister title Expert Investor it does not comment on “market rumours”.
‘Scale game’
Lyxor is Europe’s third largest exchange-traded fund (ETF) provider with €147.5bn of assets under management as at the end of August. ETFs make up $87.3bn (€74.9bn) in assets of its business – a 7.6% share of the total EMEA region, according to Morningstar data.
Kenneth Lamont, senior manager, research analyst, passive strategies at Morningstar, told Expert Investor the ETF business was a “scale game”.
“The margins are razor thin on most product lines and are tightening all the time,” he explained. “Lyxor is competing toe-to-toe with some of the largest asset managers on the planet and competition is fierce.
“The potential operational synergies that could be realised with a sale mean that the value of the business may be worth more to another asset manager than to Société Générale.”
Lamont suggested any move would be part of a wider strategic plan on the part of the bank to divest from non-core assets.
The European ETF space is currently dominated by iShares, with its $502.8bn of assets representing a 43.8% market share – four times as much as its nearest rival, Xtrackers (see graph below).
While a sale of a business of Lyxor’s size would not enable any rival to close the gap to iShares, it could lead to a new entrant into the ETF market and further consolidation.
“We have seen considerable consolidation in the market over the last few years and some potential buyers may see this as an unusual chance to enter the growing European market at scale,” Lamont said, pointing to possible bidders such as Charles Schwab.
Other likely bidders could be Xtrackers and Amundi, seeking to scale up and challenge the dominance of iShares, he added.
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