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Banks Renew Interest in Asset Management Business

Global banks are rediscovering the appeal of the asset management business, according to a recent Bloomberg article.  The article profiles several banks that are expanding their asset management divisions as they brace for profit cuts due to new Basel III capital requirements and the pending Volcker rule.  Money management has advantages – “it doesn’t require a lot of capital, . . . the investment risks are borne by clients [and unlike] businesses such as trading, where results can be volatile, funds produce steady fees based on assets under management.”  The article notes that over the last decade, banks have reduced their asset management business due to some combination of poor performance, the rise of fund sales through independent advisers, and the market timing scandals.  However, as trading and investment banking has slumped in recent times, there seems to be a renewed interest in the industry.