ASSET MANAGEMENT REVENUES DECLINE
Posted on in Editorial by Sonja
Asset management revenue has fallen for the first time since the 2008 recession. While assets under management have continued to grow, revenue and profits have declined. This indicates a “tipping point” in the market, according to Brent Beardsley, Boston Consulting Group’s global leader in wealth and asset management.
According to BCG, hedge funds and private equity had the hardest hit, making up 15% of assets and 42% of revenue. Investor’s behavior is shifting to passively minded strategies, which typically generates less revenue than alternative offerings. This is shown by a $1.5 trillion growth in assets under passive management between 2015 and 2016.
Bloomberg notes that medium and small companies lack the ability to compete due to a lack in niche focus and declining fees. To adapt to the more passive market, large companies should expand and capture growth in emerging markets while adapting to the use of technology.
Beardsley also notes that the asset management industry in China is less developed, which gives a large window of opportunity for companies wishing to expand. In 2016, assets under management increased by 21% in 2016. Further gain potential is possible from an increase in household wealth as well as the increase in pension funds and insurance companies. BCG notes the slow transition of asset managers into these new opportunities, especially in the increased use of artificial intelligence and analytics - less than half of the surveyed asset managers say that they do not implement big data and analytics to their decision-making processes. However, this means there is an opportunity to expand analytical-decision based asset management. Investors may also be seeking different income streams, opting away from traditional investments like stocks and bonds. Alternative investment choices include art, jewelry, and wine.