At the start of the autumn, I pointed out that another George Soros was on the way. At the time, I thought the markets and the media needed a new love-to-hate figure an iconic investor who we would find had made millions out of the credit crunch. We would all boo and hiss this pantomime villain while secretly admiring him for getting the scullery maid pregnant and throwing her out into the snow.
True, John Paulson's New York hedge fund outfit made huge profits betting against the value of derivatives linked to sub-prime securities. By my calculations, his gains are roughly equivalent to the market capitalisation of British Airways, with Woolworths thrown in to make up the change. He's a Soros-figure all right, but he's American and he made the money in the US, so he doesn't count. The markets may be global but sentiment of this sort is very parochial.
So who is coining it in the UK? I fear we only know who has got the "negative present value" message on their screens. We may have found the scullery maid, but not the pantomime villain.
The AIM-quoted asset manager RAB, led by founder Philip Richards, has had plenty to say on the plight of Northern Rock. Most of it has sounded like bleating from a man who took an early, aggressive and unsuccessful bet. As I write, conservative estimates put the exposure of RAB's Special Situations fund to Northern Rock at some 60m. Others say the figure may be as high as 75m. If the Virgin deal goes through, it seems very unlikely the fund will show a positive return on its investment.
The situation at RAB is definitely one to watch. If I were an investor in its stock, I'd be keeping a very beady eye on the share price, and especially the directors' dealings.
Come to think of it, not long after his $1bn-in-a-day killing against sterling in the 1980s, George Soros lost $1bn in a day betting on the yen-dollar cross rate. But markets are all about perception: we remember the pantomime villain. One wonders what Philip Richards might give to be thought of in the same vein by today's markets.
Asset managers on a roll
It's not all doom and gloom, though. While competition is as cut-throat as ever, the asset management industry is booming, according to Friday's report from Boston Consulting Group.
Over the past year, the value of professionally managed assets has risen globally by 13 per cent to $53.4 trillion. And the profit margins aren't bad either: BCG says the key participants have produced a 42 per cent rise.
The US is still the biggest market, with 48 per cent of global assets under management, up 15.2 per cent to $25.7 trillion. Europe, a market still dominated by the UK, has 36 per cent and grew by 10.9 per cent to $15.5 trillion. The Asia-Pacific region accounts for roughly 12 per cent.
If current growth rates continue, the share of global assets held by emerging markets could rise from some 4 per cent today to as much as 13 per cent by 2016, says the report.
There were plenty of acquisitions last year and the trend is apparently set to continue, accentuated by the attitude of the investment banks and a remorseless drive to cut costs. How-ever, acquisitions are not a cure-all, according to Andy Maguire, a London-based BCG senior partner and lead author of the report, whose words resonate in a Northern Rock context.
"They are a way to realise specific objectives," he says. "The sub-prime crisis may have created some opportunities for timely and reasonably priced acquisitions, but asset managers will still need to be extremely selective in evaluating potential candidates."Reuse content