The US$62 trillion global asset-management industry has finally entered a recovery after four years of stalled growth, but it promises to be a bumpy one for traditional managers of the industry’s largest asset pools, according to a new The Boston Consulting Group (BCG) report.
According to BCG’s eleventh annual study of the worldwide asset-management industry, total assets under management (AuM) and profits have nearly regained the levels both had reached before the financial crisis.
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Global AuM rose to US$62.4 trillion in 2012, surpassing the 2007 record of US$57.2 trillion. Operating margins rose to 37% of net revenues and profit increased to US$80 billion, although it remained roughly 15% below pre-crisis highs, the report says.
According to the study, the industry’s AuM growth in 2012 was driven largely by the rise of global equity and fixed-income markets — which pushed up the value of securities underlying managers’ assets — rather than by net new asset flows.
The increase in new asset flows remained relatively modest, totalling nearly 1.2% of global AuM in 2012. Most of those new flows moved to solutions, specialties, and passive asset classes rather than to the actively managed core assets of traditional players. A full quarter of traditional managers actually experienced significant erosion of their traditional actively managed core-asset base in 2012, despite the broad recovery of AuM, the report says.
"That ongoing structural shift has heightened questions about the future of traditional managers," said Gary Shub, a co-author of the report and a BCG partner based in Boston. "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."
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By GlobalDataThe most successful managers are either specialists or traditional providers who have become ambidextrous. While traditional players saw their profits decrease by 2% a year since 2010, specialists and ambidextrous players saw their profits increase by 10% percent a year, the report reveals.
US managers have shown the most leadership and reaped the rewards, outperforming their European counterparts, the study found. While the US managers’ 2012 profits rose 10% above 2007 pre-crisis levels, European managers’ profits remained 31% below.
BCG’s research revealed 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 US, Germany, the Netherlands, Australia, and South Korea — showed solid growth of 10% or more in AuM. In contrast, Japan and some European countries — including France and Italy — registered high single-digit growth that was largely the result of rising markets.
AuM in Asia, excluding Japan and Australia, increased 17% in 2012. Japan and Australia grew 6% and 14%, respectively. Latin America achieved strong growth of 14%. In the Middle East and South Africa, AuM grew 12%.
