Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

10524

Global asset management profit margins at risk amid shifting investor demands

RELATED TOPICS​

Operating margins in the global asset management industry have recovered from their 2009 lows, at a median 32 per cent in 2011, yet they remain below pre-crisis levels and the sector faces headwinds in the years ahead from choppy capital markets and tepid revenue growth in traditional asset categories.

According to a new industry analysis surveying 96 money managers worldwide that oversee approximately USD21trn in assets, profit margins since the financial crisis have been managed by controlling compensation and benefits expense.

But keeping the lid on costs will not sustain current profit margins into the future. Instead, successful asset managers will need to focus on sustaining and growing revenues by maintaining the following five key characteristics going forward:

 • Investments – unique alpha skills, benchmark-tracking, or multi-asset class solutions to clients
 • Sales and marketing – well-resourced and led teams
 • Client-facing capabilities – technically-skilled client interface built to operate in a solutions environment
 • Talent recruitment and retention – strong long-term alignment systems for key professionals
 • Operational independence – ability to function as best-practices investment manager

The economic benchmarking analysis, Performance Intelligence: 2011 Survey Results, was conducted by the US Institute, a New York-based members-only forum established for chief executives of leading investment management firms; McLagan, a provider of compensation consulting services and pay and performance data; and Casey, Quirk & Associates, a management consultant to investment management firms worldwide.

"These findings, based on one of the largest industry surveys of asset management economics, should be a wake-up call to asset management firms,” says Fred Bleakley, director of the US Institute. "While still highly profitable, the industry will be challenged as never before.”

However, alternatives and the expansion of professional money management in new markets will provide substantial growth opportunities for the industry. By 2016, alternatives – including hedge funds and funds of hedge funds, private equity, real estate, and commodities – will represent 40 per cent of total asset industry revenue and 17 per cent of assets under management (AUM). By contrast, in 2000, alternatives generated 9 per cent of industry revenue, and 3 per cent of AUM.

As inflows slow from the historic North American, European and Japanese sources of investor growth, emerging markets in Latin America, Asia ex-Japan and the Middle East are expected to present asset managers with the best opportunities for new funds from institutional and retail investors.

"Though ingredients for past success are no longer sufficient in today’s environment, asset managers that adopt the critical future success characteristics we’ve outlined can succeed in growing revenue and maintaining strong profit margins,” says Jeb Doggett, partner at Casey Quirk.
 

Latest News

Brown Brothers Harriman & Co has expanded its relationship with AllianceBernstein (AB), by adding to..
The trading and investment platform eToro has extended its proxy voting feature to all stocks..
C8 Technologies, the London-based fintech founded by former BlueCrest Capital Management partners Mattias Eriksson and..

Related Articles

The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a possible buyout of EY’s Italian consulting branch...
The trend of private equity firms acquiring businesses in the professional services sector continues with CVC Capital Partners eyeing a..
Pension funds
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next decade, industry research reveals...
UK defined benefit (DB) pension plan sponsors could have access to GBP 1.2 trillion in surplus assets over the next..
Tim Crawmer, Payden & Rygel
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also, given that equities had a strong year last year, big funds have taken some chips off the table in equities and put them into fixed income...
Tim Crawmer and Frasat Shah of Payden & Rygel write that higher yields are attracting more demand from investors. Also,..
Lady justice
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI) strategies received glowing commendations from the Bank of England in its March report...
Top marks for the Pensions Regulator (TPR) whose efforts to improve resilience in the UK pension funds’ liability-driven investment (LDI)..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by