Risks for Europe of US dominance of global asset management

Asset managers work on behalf of asset owners, such as pension funds and insurance companies, allocating their holdings of household or other savings. In Europe, the market share of United States asset managers is rising, while that of their European counterparts is declining. US asset managers may even be about to overtake European asset managers in Europe. However, there are differences between US and European asset managers, and these could play out in the context of the European Union's savings and investment union plan. On environmental, social and governance (ESG) engagement, European asset managers remain active, while their US counterparts increasingly vote against social and environmental resolutions. This is counterproductive for Europe's sustainable finance agenda. To preserve the efficiency and efficacy of the EU asset management market, three steps should be taken: 1) strengthen stewardship policies, 2) create a central supervisor and 3) enhance strategic autonomy. Stewardship policies should be tightened and asset managers should highlight how their ESG policies aligns with those of the asset owners for which they work. A major element of this tightening would be the requirement to publish a detailed record of voting on shareholder resolutions. Strong supervision by the European Securities and Markets Authority should ensure that US asset managers are appropriately supervised across the EU. Asset managers apply a hub-and-spoke model, operating from Dublin and Luxembourg. National supervisors cannot effectively oversee the Europe-wide operations, which may create blind spots. A successful savings and investment union needs strong European players to allocate European savings to European investments. The European Commission should act to counter a home bias towards US investments. When hiring asset managers, pension funds and insurers should evaluate not only the lowest cost in the short term, but also financial and ESG performance in the long term. The author thanks Catherine Howarth of ShareAction, Nathan de Arriba-Sellier of Erasmus University, and Rebecca Christie, Nicolas Véron and Stavros Zenios of Bruegel for excellent comments and suggestions.