US fund managers turn away from China and look to Europe for growth

Top US investment management firms are going on a hiring spree in Europe as draconian anti-Covid measures and rising geopolitical tensions have pushed them to redouble their search for growth outside China.

Major American firms — such as Capital Group, JPMorgan Asset Management, T Rowe Price and BlackRock — are planning to expand longstanding offices in Europe as they hunt for growth outside their home market.

China may be reopening but its fierce anti-Covid measures, the EU’s push into sustainable investing and worries over tensions between Beijing and Washington had all favoured doubling down on Europe, said Jonathan Doolan, partner at consultancy Indefi.

“That 1-2-3 punch . . . meant that a lot of firms that had a global footprint are starting to re-examine Europe as a core area for them to succeed,” Doolan said.

“Europe remains an attractive market . . . it is the largest institutional and wholesale market outside of the US. It also has a strong responsible investment focus, supported by the regulatory regime,” said Saker Nusseibeh, chief executive of Federated Hermes, the London-based affiliate of the American firm, which has $624bn under management.

Bigger American firms, which often have established offices in London and distribution networks on the continent, are being selective in their push further into Europe.

Germany, Austria, Switzerland, the UK and Nordic countries are particular targets, as is the region’s growing wealth market, say people familiar with the matter.

While regional competitors with deep roots offer specialised local products, US firms think they have an edge because of their ability to sell access to global strategies.

Until recently, big US firms looking to expand simply paid up — BlackRock bought Barclays’ investment arm BGI for $13.5bn in 2009 and Goldman Sachs Asset Management acquired Netherlands-based NN Investments in 2021.

Now, however, “there’s an acknowledgment that a lot of it is going to need to be done organically or with small acquisitions”, Doolan said.

In order to bulk up, PGIM in December announced two senior hires in London, including a new role for a London-based head of international distribution.

Retail giant T Rowe Price, which has $1.23tn under management, has grown its European operation from about 300 people in 2012 to more than 1,000 now.

Capital, which has $2.2tn under management, has almost doubled its European staff in the past decade from 430 to 750 and will double its space in London when it moves to a new office from next year.

Pimco also announced it would open its first office in France this month.

Senior executives at Capital Group and T Rowe said that while they were keen to invest in Europe they had never invested heavily in building onshore businesses in China.

“What we do in the US is we distribute mutual funds to ordinary investors through financial intermediaries, that’s the bedrock of the business. So the fact that we didn’t do it outside the US always looked a bit odd,” said Hamish Forsyth, president for Europe and Asia at Capital Group, which first started building a business outside the US about a decade ago.

Robert Higginbotham, head of global distribution at T Rowe Price, said the firm was hiring client-facing roles first in Europe and that Germany and Spain had been particularly profitable markets.

“We’re realistic — we’ve been on the ground on our own steam for 22 years but we know . . . we’re not in the top five considerations in most markets. So our plan now is really to double down on where we already exist. It’s about going deeper rather than broader,” said Higginbotham.

For JPMorgan Asset Management, sub-advisory services — where products are sold to savers via banks and other intermediaries — have driven growth in Europe, while the firm sees opportunities in alternatives and sustainable investing.

“Our European business is a core part of our business and growth strategy,” said Patrick Thomson, chief executive for Europe at JPMorgan Asset Management. Nevertheless, he said, China remained key. “We have a long-established presence in China and we’re very committed to it. If you’re a global investor you can’t ignore China, no matter what the politics are.”

The top tier of American alternatives managers, such as KKR and Apollo, which have very successful wealth management businesses, are also looking to Europe and actively hiring as they expand private assets capabilities.

“Those . . . shops are saying: we’ve already been in Europe for long enough, we know all the institutions that matter. Our next leg of the stool is going to be wealth, and we are not going to be encumbered by euros or dollars or pounds in terms of how much we can hire. We’re going to throw bodies at the problem until it solves itself,” Doolan said.

Additional reporting by Harriet Agnew