OTC MARKET NEWS Powered By Quantifi

Asset managers next ‘too-big-to-fail headache’ 

April 7, 2014
Neil Unmack, Irish Examiner

Are asset managers the next too-big-to-fail headache? The Bank of England’s Andy Haldane worries they could be too big. The risks sound similar to banking crises — yet need different answers.

Asset managers and banks are different beasts. Banks take credit risk on their balance sheet; managers leave risk with end investors. If management companies blow up, individual funds and investors may not be hurt. Even so, the way the industry is changing and growing creates risks.

Passive investing through indexes or exchange-traded funds is mushrooming, and managers are growing bigger and burrowing deeper into less liquid investments.

Haldane sees two key problems. One is size: the asset management sector, currently $87tn (€63tn), could reach $400tn globally by 2050. The bigger managers, funds or both get, the more an investor exodus or manager implosion could cause bank run-style dis-ruption.

Read more: Irish Examiner

Comments are closed on this post.


Submit your email to receive our newsletter