Morningstar’s analysts, Mara Dobrescu and Francesco Paganelli, said the €3.8 billion deal means “Pioneer’s future is now a little less uncertain” but “we are yet to be convinced the merger will bring substantial benefits to fund holders”.
Amundi, Europe’s biggest listed asset manager, said on December 12 it has agreed to buy Pioneer Investments from its parent, the Italian banking group UniCredit.
It will pay €3.5 billion, plus a €315 million special dividend, to create the 8th largest fund manager in the world – fulfilling chief executive Yves Perrier’s ambition to join the top ranks of global investment giants.
In a report published on December 15, Dobrescu and Paganelli said much about how the merger will work out was still unknown; beyond Amundi’s estimates of €150 million in cost savings and a 10% reduction in the firms’ combined 5,500-strong workforce. The integration of Pioneer is expected to take most of next year.
The analysts wrote that they “take some comfort” from Amundi’s plan to retain staff and grow Pioneer’s businesses in multi-asset funds, US equity, US fixed income and European equities. They also like Pioneer’s existing deferred pay programmes for fund managers, which should help the Italian firm retain staff “as long as they remain in place”.
But significant overlaps between the two firms in European fixed-income might lead to “rationalisation” and Morningstar is “watching closely for any signs of turnover”.
The recent suspension and resignation of Pioneer’s European fixed-income chiefs Tanguy Le Saout and Ali Chabaane “led us to reassess the funds’ investment merit”, the analysts said. Morningstar has put their funds under review.
Beyond that, the analysts said, investors in either firm’s funds “have no immediate reason to panic”. Morningstar has a neutral rating on Pioneer and a negative rating on Amundi, but isn’t changing either as a result of the merger announcement.
Pioneer Investments and Amundi both declined to comment on the Morningstar report.
Other commentators have been more positive on the acquisition. Fitch, the credit ratings agency, reaffirmed its A+ rating on Amundi on December 15, highlighting the Pioneer deal’s potential to “materially strengthen and broaden Amundi’s franchise, notably in multi-asset products outside France”.
Fitch said the deal brought “heightened integration risks” but these were “largely mitigated by Amundi’s sound track record in amalgamating businesses”, adding that it deemed Amundi’s estimates for cost-savings “realistic”.
But Morningstar’s Dobrescu and Paganelli used their report to reiterate some longstanding concerns with the French firm. They criticised its “plethoric range” of 1,100 mutual funds and ETFs, which they said had arisen from the firm launching “trendy strategies” in an “opportunistic” way.
And they also flagged concerns over the turnover of Amundi’s investment staff, with an average fund manager tenure of four years at the firm’s largest funds, which Morningstar described as “lower than at similar firms”.
But Dobrescu and Paganelli said they had a “favourable view” of Amundi’s ETF range, which has garnered positive ratings from Morningstar’s teams.