BNY Mellon Corp CEO Gerald Hassell said on Thursday he expects to see more consolidation in the asset management industry and did not rule out that the world's largest custody bank could be a buyer in a market that is punishing actively managed funds.

"I do think there will be further consolidation," Hassell said when asked by an analyst on a conference call if BNY Mellon might be a buyer. "It's going to be a scale business. We're always mindful of looking at our portfolio the right way from a business and shareholder perspective. So we'll see."

BNY Mellon's investment management business has about $1.7 trillion in assets and includes Dreyfus mutual funds and boutique managers such as Standish, Walter Scott and The Boston Company. Its equity strategies experienced $3 billion in outflows during the third quarter, but the bank's liability-driven investments saw net deposits of $4 billion.

Actively managed stock funds have been hammered by investors withdrawing money, in a long running trend that has favored less expensive index and exchange-traded funds. Earlier this month, Janus Capital Group Inc agreed to sell itself to U.K.-based Henderson Group PLC for about $2.6 billion. The deal gives Janus, which has struggled with investors pulling money, more scale as it will be part of a London-based money manager with about $320 billion in assets.

Many analysts and executives in the asset management industry see the Janus deal as a tipping point for more consolidation among smaller stock-focused firms with poor performance.

"On the equity side, what you saw with (Janus and Henderson), if you don't have good performance you're not going to survive," said Mitchell Harris, the CEO of BNY Mellon investment management.

Harris said a lot of poor performing asset managers focused on stocks will have to merge or exit the market.

"It's not sustainable," Harris said on a conference call after BNY Mellon announced third-quarter results.

Hassell said the bank continues to evaluate its own boutique money managers to see whether they have sufficient scale and capabilities.

"Virtually all of them do, and they are very strong in terms of their investment performance and the size and scale of what they can offer the marketplace," Hassell said.

BNY Mellon shares rose $1.40, or 3.5 percent, to $41.84 in late morning trade on the New York Stock Exchange.

This article was provided by Reuters.