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US banks split over asset management

US banks are divided over the benefits of owning asset management businesses or getting rid of them.

While Merrill Lynch & Co is staying in the business and Morgan Stanley is reportedly considering purchasing a stake of money manager Black Rock, Citigroup opted to exit money management last year.

Citibank said it wanted to focus on distributing funds and securities after swapping its fund management business for Legg Mason's brokerage business in a $3.7 billion deal. The bank said its asset management business had under-performed.

However, analysts said there is argument for both strategies. "Both owning asset management and not owning asset management are reasonable positions to take," commented Michael Holland, founder of Holland & Co, which manages more than $1 billion in assets.

Mr Holland said Citigroup's strategy was logical given the regulatory pressure it faced from the Federal Reserve, which told the bank in March last year to improve internal controls, Reuters reports.