Average profit margins in asset management could drop by 11% in the next three years, according to a report, despite the industry having had its best year in 2017 since 2010.
The Boston Consulting Group report, ‘The hidden pressure on asset managers’, said that there were negative trends beneath the exceptional performance of 2017.
It said that if current trends hold and if markets correct, it expects profit margins to dive from 38% to 30% and could even fall as low as 27%.
Cost increases thanks to new regulation such as MiFID and the need to invest in new technology were among the causes of the predicted profit dive.
But the migration of assets under management (AuM) from active to passive products is not the main driver of reduced average fee income, the report insisted.
The effect of these trends on profit margins will depend on the rate at which they develop and on the growth of AuM, which is closely related to the performance of the underlying asset markets, it said.
Other industry disruptors were the rapid growth of asset management in China and increased M&A activity.
China has become the fourth-largest asset management market up from eighth position only five years earlier with strong growth in both retail and institutional segments.
©2018 funds europe
