Barclays’ proposed sale of BGI may be an eye-catching deal thanks to its size, but it is unlikely to be the last bank that gets out of the fund management business.
Banks have debated whether they need to control their asset management arms for years. In the United States, Citigroup and Merrill Lynch were early sellers of their divisions in 2005 and 2006.
Those moves were prompted by growing concerns among regulators that banks might sell clients their own, inferior, funds. Instead, banks were encouraged to offer customers a range of funds from a variety of different managers in a structure dubbed “open architecture”.
Today, banks are selling their asset managers because they need the cash. There are few buyers for regular banking assets at anything other than fire-sale prices. But because asset managers are not heavy users of capital, most of the proceeds of a sale flow straight through to the capital ratio.