Rebooting the global asset management industry

Rebooting the global asset management industry 9 Main Findings 1. T he asset management industry is seeking to reinvent itself after existential challenges An ill wind has been blowing through the industry over the past decade, causing unusual reversals. Asset in-flows have been mostly going to mega indexers. Fee compression is accelerating. Market growth, instead of the organic route, has been the key driver of top-line growth. Alpha generation has remained challenging. As if this squeeze were not enough, end- investors have become ever more demanding. Regulatory oversight has intensified, with the rise of Defined Contribution plans and the implied personalization of retirement risks. Profit dynamics have deteriorated, sparking a makeover of the existing business models. This process was reinforced by the emergence of what are now widely seen as the three key drivers of organic growth for the foreseeable future. One is the emergence of a new class of digitally savvy investors benefiting from the biggest wealth transfer in history as the post-war Baby Boomers pass on their wealth to a new generation of investors, estimated at $72 trillion by the consulting firm Cerulli Associates. For its part, the European Union’s latest initiative aims to turn savers, with €10 trillion in bank deposits earning a pittance, into investors in search of better returns in capital markets. The second growth driver will likely see the democratization of private markets via tokenization that enhances product liquidity via fractional ownership, making private markets more accessible to mass market retail investors. The third driver is the likely rise of AI and GenAI as heartland technologies that are capable of disrupting almost every discrete activity in the asset industry’s current value chain. A sizeable majority of survey respondents see technology as a new potential source of value creation (Figure A, left chart). Indeed, this confluence of disparate developments is reshaping the retail space, possibly marking an inflection point for the asset management industry as the old one- size-fits-all approach remains out of sync with new profit drivers (Figure A, right chart). More details in Theme 1 A sizeable majority of survey respondents see technology as a new source of value creation. “Some asset managers are now in a negative feedback loop that has made it harder to invest in technology and talent to compete.” Interview Quotes “Since 2006, 90% of top-line growth has come frommarkets artificially buoyed by cheap money policies. This prop went in 2021.” Figure A To what extent will AI & GenAI directly or indirectly be a key source of value creation in your business? Do the latest reversals and the new change drivers imply that asset management is at an inflection point? Source: Citi/CREATE-Research Survey 2025 Nil Some extent Medium extent Large extent No Maybe Probably Definitely 3 17 20 27 48 40 29 16 % of respondents % of respondents