April 8 (Reuters) – It isn’t true that the asset management
industry is too big to fail but it may well be that it is too
lame to be tolerated.
Noting the rocketing growth of the global asset management
industry, which is on track to more than quadruple in size by
2050 to $400 trillion, Bank of England executive director for
financial stability Andy Haldane argued that funds may require
closer and tighter supervision by regulators.
“Their size means that distress at an asset manager could
aggravate frictions in financial markets, for example through
forced asset fire sales,” Haldane said in a speech last week in
“It is possible to identify a set of market-wide conventions
or regulatory practices which have the potential to drive common
behaviour among asset managers and their institutional client
base. These have the potential to turn idiosyncratic market
frictions into systemic market failures.” (here)
The idea that asset managers are too big to fail, that their
sheer size makes them a particular threat, is at best unproven,
as Haldane acknowledges. Not only do asset managers employ far
less leverage than banks, they mostly play with other people’s
money, making those that flame out more a source of private
grief than public strife.