Money manager assets reach record high

1155329_coin_towersAfter four years of stalled growth, money managers’ assets under management (AUM) worldwide rose to a high of US$62.4 trillion in 2012— topping the 2007 record of $57.2 trillion.

Boston Consulting Group’s Global Asset Management: Capitalizing on the Recovery report finds that money managers’ operating margins rose to 37% of net revenues and profit increased to $80 billion. However, that was 15% the pre-financial crisis highs.

Although the results reflect a recovery, last year’s AUM growth was largely driven by the rise in global equity and fixed income markets.

The increase in new asset flows was a modest 1.2% of global AUM. Most of the new flows moved to solutions, solutions, specialties, and passive asset classes rather than to the actively managed core assets of traditional players.

One quarter of traditional managers actually experienced significant erosion of their traditional actively managed core-asset base in 2012.

“That ongoing structural shift has heightened questions about the future of traditional managers,” says Gary Shub, a co-author of the report and one of the firm’s partners. “Many asset managers enjoy substantial revenue streams from their existing assets, which often mask the urgency to confront structural changes already here as well as changes to come.”

The most successful managers, the report says, are either specialists or traditional providers who have become “ambidextrous.” That is, they have maintained their active core-asset businesses while developing capabilities to capture new faster-growth assets, including solutions and specialties.

While traditional players saw their profits decrease by 2% a year since 2010, specialists and ambidextrous players saw their profits increase by 10% a year.

The report also reveals that the recovery masked widely divergent rates of AUM growth in 2012 among and within regions. Managers continue to confront a two-speed world in which the smaller, rapidly developing markets grow faster than the developed markets, with higher net flows.

At the same time, AUM growth in the developed markets was significantly greater in absolute terms because of the dominant size of those markets.

Among the developed markets, one set of countries—including the United States, Germany, the Netherlands, Australia, and South Korea—showed solid growth of 10% or more in AUM that was driven by both market impact and net flows.

In contrast, Japan and some European countries—including France and Italy—registered high single-digit growth that was largely the result of rising markets.