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Fidessa Blog - Too big to fail or too big to succeed?

First Published 2nd June 2015

Steve Grob looks at the latest move from the FCA support asset managers' who are fighting proposals that could see them labelled as potential threats to the financial system.

Steve Grob, Fidessa

Interesting to see that Martin Wheatley, head of the FCA, is siding with the largest asset managers in their push back against the Financial Stability Board. The basic idea is that because of their size, global regulators want to deem them "systemically important" and so encumber them with greater liquidity requirements and other controls.

This seems like fairly contrarian logic - presumably the largest asset managers have become so because they are good at the job of investing their clients' money over time. So why suddenly make it harder for them compared to their smaller rivals? Successful asset management is about getting the right combination of risk and reward in the long term and demands a cautious, conservative approach. This is especially true if you contrast the asset management industry with the more racy hedge fund end of the market that can leverage themselves proportionally way higher than any asset manager (LTCM anyone?).

Just being big isn't necessarily bad. Surely looking at how different types of buy-side firms actually operate is the starting point but, yet again, I fear it is politicians 1 - common sense nil.

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