Global Asset Management Industry Scales New AuM Heights; Challenges Remain - BCG

Tom Burroughes

8 July 2015

The value of professionally managed assets around the world rose to a barely-conceivable $74 trillion last year, a record figure, while industry profits reached another record at $102 billion. Meanwhile, operating margins held steady, according to an annual survey of the sector by Boston Consulting Group.

The figures suggest that the global industry is in relatively rude health, countering perhaps some of the angst that continues to hang around the sector as a result of compliance costs, concerns about low or even negative real interest rates, and geopolitical worries.

The findings come from a report called Global Asset Management 2015: Sparking Growth With Go-to-Market Excellence. This is the 13th annual study of the world’s investment management business.

For all the broadly positive first message from the headline data, the report contained some more cautionary notes, such as around margin pressures.

The aggregate profits of the industry rose 7 per cent year-on-year, the BCG report said, largely caused by rising market levels rather than because of underlying structural changes. Growth that came from net new money – at 1.7 per cent of assets under management – was at the same pace as in 2013. The report said net flows are likely to be stuck for some time in the low single digits.

Fee pressure has hit revenue margins and the report noted that institutions are sharpening scrutiny of what they pay, challenging fees and trying to drive harder bargains. Greater transparency is reducing fees in the retail space, meanwhile.

“Whatever their segment or product focus, asset managers today face a future in which growth isn’t a given. In particular, they will need to generate more value through end-to-end, go-to-market efforts – from design to execution – by leveraging their marketing, sales, and pricing capabilities,” the report said.

“Many of today’s most effective managers focus their efforts on three capabilities: marketing effectiveness, sales force productivity, and enhanced customer experience,” it continued.

In its opening remarks, the report also stated that if “global managers get only one market right, it must be China. Still, gaining access to China’s domestic investors can be complex”.

The report was based on benchmarking among 135 major asset managers together holding $39 trillion, or 53 per cent, of global AuM, and it covered more than 4,000 data points per player.