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Numerous commentators watching London’s financial district have expressed considerable dismay since reports emerged of yet another prominent financial entity being acquired by American purchasers. Nuveen’s acquisition of asset manager Schroders—a venerable financial firm, among the last of its kind in the Square Mile—was broadly depicted as a further detriment to the City’s future.
However, what if such divestments are not detrimental? What if, rather than fulfilling dire predictions regarding the demise of a British symbol, an acquisition by American proprietors could yield universally positive outcomes? A pertinent comparison might be drawn from the divestment of another esteemed British asset management firm in 2009.
Amidst the pressures of the global financial crisis, when Barclays bank found itself precariously close to its regulatory capital thresholds, it determined that divesting its Barclays Global Investors business offered the swiftest and most straightforward method for capital generation. BlackRock acquired it for $13.5 billion.
The sale was undoubtedly difficult for Barclays—it forfeited an operation contributing half a billion pounds in pre-tax earnings (representing 10 percent of the group’s overall profit) and offering significant diversification from its primary banking activities. This deal was among several elements that dampened the group’s momentum. While Barclays has regained some of its former vigor recently, profits have increased by merely around 50 percent since 2008, and its stock is currently valued at a fraction of its pre-Global Financial Crisis zenith.
Conversely, for BlackRock, BGI proved to be a game-changer. The takeover expanded the American asset manager’s scale twofold, reaching approximately $3 trillion in managed assets. Moreover, it established the groundwork for a considerably larger and more lucrative enterprise: current net income stands at roughly tenfold its value before the BGI transaction.
Subsequently, the core of BGI—specifically its iShares exchange-traded funds division—fueled a worldwide fascination with ETFs, an economical, streamlined fund framework engineered to replicate index performance. Supported by an immense marketing apparatus and unparalleled international presence, BlackRock has emerged as the globe’s foremost ETF provider—iShares alone manages almost $6 trillion. Barclays can only ponder what opportunities were missed.
However, as policymakers and City observers consider what many perceive as the grim foreboding of Nuveen’s acquisition of Schroders, they ought to consider this: BlackRock’s considerable achievements in the ETF sector, primarily attributable to its iShares purchase, have actually served the City’s interests, rather than siphoning off its ventures.
Currently, BlackRock employs over 21,000 individuals (approximately one-fourth residing in the UK), a figure more than twice the total of 5,300 it employed in 2008, and the 3,700 staff it gained with BGI. Its global headquarters on Throgmorton Avenue, close to the Bank of England, serves as the hub for the creation and transaction of iShares ETFs distributed across Europe, and a significant portion of Asia and Latin America. (iShares’ American operations in San Francisco and New York are larger, but this has consistently been the case, even during Barclays’ ownership.)
The more substantial a company’s presence in the City of London, the broader the range of supplementary employment it supports—encompassing roles from custodial services and technology to legal and capital markets assistance.
This situation mirrors the Wimbledon analogy within the financial sector: the renowned tennis championship has consistently attracted premier global players, despite British champions like Andy Murray and Virginia Wade being infrequent victors.
London’s financial district has consistently flourished due to its global perspective, serving as a pivotal centre not solely for the UK’s financial sector but also for Europe’s and the wider international community. Schroders itself, naturally, embodies this strongly, having been established—like numerous other celebrated 19th-century financial enterprises—through the diligence and ingenuity of German immigrants.
The comparison between BGI and Schroders is flawed—indeed, it’s somewhat inverted. While BlackRock was an ambitious, rapidly expanding international asset manager poised to elevate ETFs to global pre-eminence, Schroders’ ultimate new proprietor is a conservative mutual fund. Where iShares pioneered an innovative fund structure that would eventually revolutionize the management of equities, and subsequently bonds, Schroders, conversely, holds onto the belief that traditional active management is not a declining sector.
Nevertheless, these acquisitions, separated by 17 years, share a crucial commonality: they demonstrate that the City of London continues to be perceived as a focal point for valuable purchases and a rich source of skilled financial services expertise. The owners’ national origin holds no consequence.
patrick.jenkins@ft.com