Asset managers riding high but margin pressures loom

Net inflows reach 4.3% for 2017 during banner year for the industry but fees continue to fall as profits are squeezed.

A new report from Boston Consulting Group has found global asset managers recorded a banner year in 2017 with net inflows of 4.3% in an “exceptionally good year” for the industry.

The report, based on a preliminary sample of 30 institutions representing $34 trillion of assets under management (AuM), also found AuM grew by 14% in 2017 with profits increasing 9% year-on-year.

However, the report also warns that the asset management landscape is prepped for change, primarily through the emergence of new trading technologies, and that asset managers should prepare for higher margin pressures to take a significant toll on profits.

BCG’s report said that the increased performance of global asset managers was primarily market driven and “should not disguise the trends that are squeezing profits”, citing the continued fall in asset management fees which have dropped 3% for each for the past three years.

“The strategic problem for asset managers is not the need to know what is coming, but the need to take the actions required to stay in front of whatever occurs,” said Brent Beardsley, a BCG senior partner, co-author of the report, and global leader of BCG’s asset and wealth-management segment.

“Some bold moves will be required—radically overhauling technology, entering new markets, and making acquisitions, among others. These are daunting challenges, but the extraordinary market-led performance of 2017 puts many players in a strong position to take them on.”