Rebooting the global asset management industry

Rebooting the global asset management industry 21 Key Findings a. Inflection Point The following secular trends have principally caused a tipping point: • net inflows cornered by hyperscale players with multiple capabilities • the rapid advance of passive funds into clients’ core portfolios • the acceleration of fee compression in active funds • margin compression as costs rose faster than revenues • market performance, not organic routes, dominating top-line growth. b. NewClient Segments Over the next three years, organic growth is likely to be boosted by: • huge intergenerational wealth transfer from Baby Boomers • prospective policy actions to turn savers into investors in Europe • the rise of mass affluent digitally savvy and self-directed investors • the growth of outcome-oriented thematic products • the continuing shift from DB to DC retirement plans for employees. c. Changes in Business Models Factors affecting asset allocation may well have a strong bearing on existing business models. They include: • the democratization of private markets to attract retail investors • deglobalization causing fragmentation in the global economy • the continuing rise of passive funds causing alpha–beta separation • the rise of hybrid strategies blending different investment styles • the rise of new investment themes in line with investors’ personal values. d. Recalibration of the Value Chain Three diametrically opposing features may well define the operating models: • M&A will likely promote vertical integration within asset managers aided by technology • continuing outsourcing and the rise of platforms will likely promote horizontal integration • the latest round of tariffs will cause geographical divergence in asset class correlations between the key regions. Key Messages A congruence of personalization of risk, huge wealth transfer and the latest technology is now transforming the retail scene on what clients want to be served, how they want to be served and when they want to be served. The old one-size-fits-all approach may well be history. The implied inflection point also suggests that the old ways of doing things will no longer work as the asset management industry faces new growth drivers. “The future is not something we enter. It is something we create.” Leonard Sweet