This week has seen further consolidation in the European platform market, with Clearstream acquiring a majority stake in UBS Fondcenter. When combined with Clearstream’s Fund Desk business, the new ‘Fondcenter’ platform will be the third-largest platform in Europe, with $230bn AUA.

Many platforms were initially founded by distributors who had their own asset management arms (in this case UBS). They were set up to integrate third-party products into their portfolios, so are typically pretty lean internal business units. Their value has skyrocketed as the platform market has matured, encouraging many firms to sell these units to third parties.

As well as the platform assets that this deal brings to Clearstream, there are the additional asset manager distribution agreements.

Institutional platforms are network businesses, looking to connect as many asset managers and distributors as they can. Despite the trend towards cross-border fund distribution, the use of local asset managers still dominates, particularly in northern Europe. This makes it harder for platforms to grow into new markets. Without the local distributors it’s difficult to sign up local asset managers and vice versa.

The last few years have seen platform M&A activity focused on buying platforms in new markets to develop local business: Allfunds buying Nordic Fund Market; and MFEX buying French Axeltis and Spanish Ahorro. UBS Fondcenter has a large number of pan-European distribution agreements with asset managers thanks to UBS’ own wealth management arm. This transaction therefore gives Clearstream a boost.

A significant amount of the Fondcenter assets will initially be from UBS’ own Global Wealth Management arm but Clearstream will look to expand the number of third-party distributors – they will have to in order to justify the price tag.

Taking account of all the partnerships in the market (Allfunds and Credit Suisse; MFEX and Société Générale) and subject to regulatory approvals, the top three platforms in Europe will administer around €1tn in assets.

Full details will be covered in our upcoming report European Fund Distribution: Platforms – get in touch for more information.