We have two pieces for you this week which reflect the effect tariff turmoil and its close friend dollar turbulence is having on investment managers.
Gill Wadsworth reviewed the latest Broadridge report on the investment management industry which finds that US trade policy and geopolitical tensions will hamper growth in the investment management industry, but assets are still expected to hit USD132 trillion by 2027.
Research from consultancy Broadridge finds the industry will expand at a compound annual growth rate (CAGR) of 7.6 per cent increasing from USD106 trillion in 2024, passing USD114 trillion in 2025, to reach USD132 trillion by 2027.
Nabeel Ansari, Senior Director of Global Growth Solutions at Broadridge, says: “Fee compression remains a global reality: while absolute revenues are set to increase, margins continue to face structural pressure. Drivers include intensifying competition for flows, ongoing distributor consolidation creating pricing power, and the need to remain competitive against lower-fee options such as passives.”
Meanwhile FX hedging specialist firm MillTech reports that amid rising dollar volatility, the vast majority (85 per cent) of North American fund managers now hedge their forecastable currency risk, up from 79 per cent last year and 72 per cent in 2023.
The dollar experienced its worst first-half performance since 1973, weighed down by aggressive US trade policies, rising fiscal concerns, and expectations of Fed rate cuts, posing significant uncertainty for fund managers.
While 99 per cent said their returns had benefited from these politically driven swings, over a third (37 per cent) say they’ve suffered losses due to unhedged FX risk, and 99 per cent report concerns over the impact of dollar volatility on foreign market exposure. Of those currently not hedging, 70 per cent are now considering doing so due to current market conditions, a huge increase from only 16 per cent in 2024.
Beverly Chandler, Managing Editor, Institutional Asset Manager
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