Tuesday, October 23, 2018 Stamford, CT USA — In a maturing asset management industry, managers will no longer be able to rely on market expansion as a main source of growth. As a result, in the future it will be much more difficult for institutional asset managers to grow and maintain current levels of profitability. But it will not be impossible.
A new report, Charting a New Course: Achieving Profitable Growth in a Maturing Asset Management Industry, from Greenwich Associates contends that the market still presents viable and attractive opportunities for managers—if they are capable of adapting to the new environment. “Success in a slower-growth global asset management industry will require change in the way managers pursue clients, market their products, and execute their strategies on a day-to-day basis,” says Andrew McCollum, Greenwich Associates Managing Director.
Navigating an Environment of Slowing Asset Growth
Almost all observers agree that market returns and asset growth rates will be significantly lower in the coming decade than they have been since the financial crisis. Limited asset growth will fuel competition as asset managers look to expand by capturing clients and assets from rivals. That competition will be exacerbated by the entrance of new competitors, and these developments will all occur against the backdrop of investors’ well-documented embrace of passive strategies, which has already put pressure on fees and industry profit margins. The new report recommends asset managers adopt the following three strategies:
- Creatively dentify and exploit growth segments that exist within the slowing industry
- Emphasize product quality and innovative product improvement to resist margin compression
- Systematically and consistently improve the efficiency of production and distribution systems
Data will be a key driver of success. “Enhanced analytic capabilities create unprecedented opportunities for asset managers to identify pockets of growth and find defendable niches—even in a maturing market,” says Andrew McCollum.
Innovation will also be an imperative for asset managers—not just in products and services, but also in the application of technology to make distribution and client service functions more effective and cost efficient.
“In a maturing market, managers can never take their foot off the gas,” McCollum concludes. ”To keep growing and remain profitable, asset managers will have to find ways to ensure excellence in execution across their organizations, every day.”