Crédit Agricole and SocGen to merge units

French giants agree to merge asset management operations.

Christopher J. Traulsen, CFA | 26-01-09 | E-mail Article

Crédit Agricole and Société Générale announced today they have struck a "preliminary agreement" to combine their asset management operations. The move envisions combining the European and Asian operations of SocGen's SGAM asset management arm with Crédit Agricole's. Crédit Agricole would own 70% of the new entity and SocGen owning the remaining 30%.

The announcement comes on the heels of SocGen's sale of its UK asset management arm to GLG Partners. The new group would have €638bn in assets under management, making it the fourth largest asset manager in Europe.

The announcement comes as asset managers across Europe find themselves running dramatically smaller pots of money in the face of market depreciation and outflows. Because of this, we expect there will be continued consolidation among asset management firms and a rationalisation of fund line-ups that were allowed to become bloated during the bull run. Whilst SocGen and Crédit Agricole are eager to state the possible benefits of the combination, it's our experience that fund company mergers rarely work in fund investors' favour. Indeed, they are the quintessential moment in which the business needs of the asset managers involved take priority over the interests of fund owners. For example, such mergers may trigger higher costs in an effort to recoup the cost of a deal more quickly, fund mergers, manager departures, analyst re-organisations, and or strategy changes, any one of which could hurt the interests of fund investors. Too little is known to comment on the merits of this deal for investors, but we will watch for potential red flags as it proceeds.

Christopher J. Traulsen, CFA, is Director of Pan-European and Asian Research for Morningstar Europe. He would like to hear from you, but cannot give financial advice. You can contact the author via this feedback form.
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