Data and Analytics Insights

Far from Monopoly: Why investors shouldn’t fear asset management consolidation any time soon

Dewi John

Head of UKI Research in Refinitiv Lipper

Another asset management acquisition, and another time-honoured name looks set to disappear.

The announced purchase of Putnam by Franklin Templeton at the start of June throws up the questions (again, and inevitably): how much is the asset management industry being dominated by large players, and what are the effects?

LSEG Lipper analysis of the UK asset management industry shows that between 2003 and 2023, the top 10 asset managers’ market share by total net assets (TNA) have gone from 49.3% of TNA to 52.6% (see table).[1]


So not much to get excited about, you might think. However, within those top 10, there have been significant shifts. The market share of the top three has gone from 20.7% to 28%, while the market leader has almost doubled its market share, from 8.1% to 15.6%. Over that time, many of the names have changed, vowels have been shed, and market leadership has rotated.

Increasing concentration isn’t something peculiar to asset management, as anyone looking at the top end of the S&P 500 can see. And it’s far from a given that this is in itself a bad thing for customers.

UK asset manager assets and market share (£m and %) 2023 2013 2003
TNA GBP m 2,043,783 1,016,624 245,485
Top 10 1,074,206
Top 3 572,849
Top 1 318,265

Source: LSEG Lipper

However, greater concentration does throw up some issues that are specific to the investment sector. Some research has linked the increased proportion of stocks held by the largest institutional investors to greater market volatility – albeit with the caveat that these assertions “remain unclear and unexplored”. What is easier to gauge is the degree of price competitiveness, performance, and innovation. Regarding the latter, there’s been much over the past decade, not least in the ETF and indexing space. What’s more, the trend in charges is still downward, both as a result of the rise of passive investing and of regulatory pressure. Such trends in charges are themselves driving consolidation, as asset managers seek greater economies of scale in response.

A slower rate of growth when compared to the past decade will inevitably lead to greater pressures to achieve scale through consolidation rather than organically, and we’ve certainly seen lots of the former in the past, even with a rapidly expanding industry overall.

Are we there yet?

Should investors be concerned about potential anti-competitive results of industry consolidation? Insofar as there’s nothing unique about financial services in this respect, it’s something of which to be mindful. Are we there yet? Statistical measures of concentration, such as the Herfindahl-Hirschman Index (HHI), show that asset management is a long way off being heavily concentrated.

Industry concentration is calculated using HHI by summing the square of the market share of each incumbent. An absolute monopoly would therefore have an HHI of 10,000, a market with one hundred companies each with an identical market share would have an HHI of 100, an industry where one company had half the market share, with the rest spread evenly among a further 50 would have a HHI of 2,550. And so on.

A market with an HHI of less than 1,500 is considered competitive, between 1,500 and 2,500 is moderately concentrated, and an HHI of above that is highly concentrated. I did a rough-and-ready HHI for UK asset management, just taking the top 20, which have a combined market share of 67.3%, and got a figure of less than 450. Even adding the very long tail of relative minnows isn’t going to get that figure anywhere near 1,500, let alone 2,500.

While there are always problems to be addressed, these don’t seem to be driven significantly by consolidation. Indeed, given cost pressures, one could argue there’s room for some more. And, while we may get nostalgic about the disappearance of our favourite beer or chocolate bar brands, this is less likely to extend to asset managers.

[1] Calculation based on UK registered for sale mutual fund and ETF total net assets, with currency of record GBP

Stay updated

Subscribe to an email recap from:

Legal Disclaimer

Republication or redistribution of LSE Group content is prohibited without our prior written consent. 

The content of this publication is for informational purposes only and has no legal effect, does not form part of any contract, does not, and does not seek to constitute advice of any nature and no reliance should be placed upon statements contained herein. Whilst reasonable efforts have been taken to ensure that the contents of this publication are accurate and reliable, LSE Group does not guarantee that this document is free from errors or omissions; therefore, you may not rely upon the content of this document under any circumstances and you should seek your own independent legal, investment, tax and other advice. Neither We nor our affiliates shall be liable for any errors, inaccuracies or delays in the publication or any other content, or for any actions taken by you in reliance thereon.

Copyright © 2023 London Stock Exchange Group. All rights reserved.