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All Around the World, Same Price

by Lee

Last month, Steven wrote about the emerging trend among global distributors of consolidating their global research functions. Since that time, I've had conversations with four large asset management firms that they have begun to consolidate their global National Accounts function in response. These initiatives are typically focused on a small number of large distribution partners, often some combination of Citigroup, Goldman Sachs, HSBC, JPMorgan, and Merrill Lynch.

As firms look to centralize their distribution discussions, a number of questions arise, such as where to find qualified individuals to manage global distribution relationships. Perhaps most importantly, firms are faced with questions about pricing. For example, should sub-advisory fees in different countries be based on the same schedule or vary from region to region?

While many firms fear that distributors will try to squeeze them on pricing in exchange for shelf space around the world, the opposite effect may start to come into play. With increasing competition for limited product capacity (from global distributors as well as from sovereign wealth funds), product manufacturers may be able to command a premium in exchange for capacity in truly alpha-generating strategies. Pricing decisions will need to be made on a case-by-case basis, but firms must recognize that these choices are becoming ever more complex in a global environment.