The asset management industry’s global profits and assets have risen to record levels, but securing future growth will require managers to ramp up their go-to-market efforts, finds a Boston Consulting Group (BCG) report.
Worldwide assets under management (AUM) grew to US$74 trillion in 2014—a third consecutive annual record—according to BCG’s 13th annual report, Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence.
Profits rose to match its historic peak of US$102 billion, achieved before the financial crisis.
“The 2014 performance shows that the industry has moved beyond the dynamics of the post-crisis period but also that it faces a challenging new environment,” says Gary Shub, a Boston-based BCG partner and a co-author of the report. “Asset management continues to rank among the world’s most profitable businesses, and it’s a growing one for managers that get it right.”
Managers’ asset growth—and their record profits—continued to be largely the result of rising asset values on global markets rather than new asset flows, the report notes.
Net new flows as a percentage of prior-year assets remained unchanged in 2014—and well below pre-crisis levels—after achieving the strongest post-crisis levels for two years in a row. Net flows remained a modest part of total growth, and most of those flows went to passives, solutions, and specialties rather than traditional actively managed products.
Operating margins, or profits as a percentage of net revenues, which reached a high of 41% before the crisis, remained flat at 39% in 2014—after growing the year before, according to BCG.
Net revenue growth fell short of overall AuM growth because of pressure on fees paid to managers in both the retail and institutional segments of the business.
Some managers are finding success by improving their go-to-market approach through advanced capabilities in data-driven decision making, including use of big data, the report says. Many of the most effective managers focus on three capabilities: marketing effectiveness, sales force productivity, and enhanced customer experience.
In terms of growth by region, Europe’s net flows rebounded for the first time since the crisis, catching up to those in the U.S., the report says. Growth was driven by Spain and Italy, but Scandinavian and German markets also achieved solid advances.
Asia-Pacific remained the fastest-growing region, led by China and India.
The most significant difference among managers was the higher performance of those focusing on the retail segment. Retail-focused managers outperformed institutional managers by relatively wide margins in AuM, revenue, net flow, and profit growth.