With Degroof Petercam, Belgium has once again lost an important financial player to a foreign competitor. “Unfortunately, Belgium has become a third-rate asset manager.”

With the sale of Degroof Petercam to the French Crédit Agricole, a Belgian Financial player has once again passed into foreign hands. With this acquisition, Belgium will lose an important private bank, an experienced asset manager and an active mediator on the Belgian financial markets, or what is left of it.

” It is unfortunate for Belgium as a financial decision-making centre that a major financial player is once again falling into foreign hands, ” says Thomas Tilley, senior economist at the European Association for funds and asset management (EFAMA). “Belgium risks losing knowledge and decision – making power in fund and asset management. And there is not much of that know-how in Brussels. Although it is still coffee grounds to see how it will evolve in this particular case.”

All scenarios are still possible for the Belgian activities of Degroof Petercam. It is possible that the fund activities will simply remain in Belgium, that a large part of them will move to Paris, that they will be sold, or everything in between. Examples of such acquisitions from the past confirm that it can still go in all directions. After the financial crisis, our country lost the major bank Fortis to the French BNP Paribas. Much of the market activity and fund management disappeared to Paris. In the fund industry, the asset manager Candriam was acquired by the life insurer New York Life in 2014, but the majority of the business has remained in Belgium, without the customers and employees noticing much of the acquisition.

Koen Hoffman, the CEO of the Ghent-based asset manager Value Square, regrets the impact on the broad Belgian financial ecosystem. “It’s a further escalation. If more and more players like local asset managers disappear, it impoverishes your local financial fabric. Degroof Petercam will become even more relevant in services such as institutional management. So for the customers, the acquisition will not be a bad thing.”

Etienne de Callataÿ, one of the founders of the asset management company Orcadia, joins that. “In terms of Ecosystem, know-how and employment, Belgium has unfortunately become a third-class asset management company.”

The acquisition is also a symptom of important developments in the fund sector. ” The profit margins are under pressure, ” says Thomas Tilley. “Management fees are falling under the influence of increasing competition from passive funds. At the same time, the costs for asset managers remain high due to the increasing reporting obligations and new technology, such as artificial intelligence, that they have to integrate.”

” There are two ways to be really profitable, ” Tilley knows. “Either you have a lot of scale and that is where your profitability lies. Think of big players like BlackRock, Amundi and the big banks. Either you are specialized in a certain niche, such as sustainable funds or private equity, and that is where your added value lies. But the traditional active asset managers who only focus on the largest and best – known stock or bond markets are less and less able to compete with the big index players. They either have to grow larger themselves, or they are taken over.”

Jan Longeval, expert and independent consultant in asset management, recently made a market study of Belgian asset management. He acknowledges the same tendency, but at the same time argues that this consolidation does not need to be dramatized. “It’s not that small players have no chance of survival and are doomed to be swallowed up by the big ones. The common idea is that you have to manage more than 10 billion euros in assets to remain independent. In Belgium, a number of small asset managers are very profitable. This is due to the simplicity of their model. In asset management, the complexity of your supply is the enemy of your profitability. Small asset managers who wisely adhere to a limited supply of funds can be very profitable even with assets under 1 billion euros under management. The same observation also applies to the big players: the simpler the model, the more profitable.”

In addition, the type of clientele is decisive. Fund and asset managers target two types of clients: retail or institutional investors. The first are wealthy individuals who invest in funds through private banking, or ordinary savers who put part of their pennies into funds. Institutions are large financial players, such as insurers and pension funds, that have a lot of money to invest and have this done in whole or in part by external asset managers.

According to BEAMA’s figures, 38 percent of the assets managed by Belgian funds belong to institutional parties and the rest to private individuals. “Belgium is strong in fund management for individuals, especially for pension savings and supplementary pensions,” says Thomas Tilley. Only in Spain and Hungary is the market share of individuals compared to institutions even greater.

Institutional investors are less prominent in the Belgian funds market. The Belgian institutional market is quite small and the entry threshold to the foreign institutional market is high. “Only a handful of Belgian asset managers have gained a position in that international market. Only BNP Paribas, Candriam and DPAM have succeeded in their way,” says Jan Longeval. “That’s a very difficult segment to operate. The quality of your reporting and your risk management should be top notch and many large investors never want to hold more than 10 percent of their assets in a fund. For this, as a fund manager, you must have a solid organization and sufficiently large funds. So that scale does play a role.”