Amundi’s decision to acquire Lyxor poses the challenge of consolidating two overlapping product ranges but also an opportunity to gain scale and cut fees.
After years of deliberation and rumours, Société Générale looks set to offload Lyxor to Europe’s largest asset manager for a lump sum of €825m.
With its strategic distribution alliance with SocGen in place, Amundi has always been the frontrunner from the moment the French investment bank decided to sell its asset management arm.
Now looking to take on Lyxor’s €77bn ETF assets under management (AUM), Amundi’s combined assets of €142bn will make it Europe’s second-largest ETF issuer, leapfrogging DWS’s 11.2% market share with its new 13.6% stake.
With such a dramatic shift in market share and assets, Amundi needs to make sure the dust settles favourably as it integrates Lyxor’s team and products into its ranks.
Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said he expects the transition to occur relatively smoothly but stressed it will likely involve a number of product closures and mergers.
Between the two previously separate entities, Amundi and Lyxor hold a total of 17% of all European ESG ETF assets, as well as significant concentration in European synthetic ETFs – where the pair hold almost half of all assets in the segment.
Highlighting the overlap between the ranges, 14 indices are currently tracked by at least four Amundi-Lyxor ETPs apiece. Significantly, the products tracking just these 14 indices make up 30% of the merged company’s combined assets, according to data from Bloomberg Intelligence.
The indices seeing the greatest overlap are the MSCI Emerging Net Total Return USD index and S&P 500 Net Total Return index, which are replicated by nine and seven different strategies, respectively. These two indices alone are tracked by 14.7% of the merged company’s total assets.
Examining the acquisition, a recent Bloomberg Intelligence report said reducing product redundancies could help the combined Amundi-Lyxor gain scale and lower fees.
According to the report, of the 165 fee cuts that occurred during 2020, the average size of the products issuing fee reductions was more than €700m. With this in mind, merging products that track the same index will not just help create scaled products in the first instance but will also increase the scope for fee cuts and thus the potential to attract more assets in future.
Andrew Limberis, investment manager and Omba Advisory & Investments, said it will be a meaningful undertaking to consolidate such a large number of ETFs, especially when some of them are very similar.
“They will need to combine a fair number of them – although there would be no need to rush this process – to ultimately benefit from economies of scale.
“Many of Lyxor largest ETFs (by AUM) offer quite standard, core exposures which Amundi already has a decent range,” Limberis continued. “It helps that Lyxor ETFs are mostly Luxembourg and French domiciled as with Amundi.”
Though any potential of challenging BlackRock’s 43.6% stake in European ETF AUM seems farfetched, Amundi’s success in assimilating Lyxor’s product range will be a key consideration for its new rivalry with DWS for second place.