An uneven global economic recovery vulnerable to increasing Covid-19 cases is said to be a primary factor behind the asset management industry’s negative outlook for the coming year.
The annual Moody’s Investor Service outlook, published on Tuesday, highlighted that the sector finds itself in a challenging operating environment due to increased market volatility and a shift to more conservative strategies that dampen revenue.
Lower risk appetite is stunting organic growth, according to the credit rating firm, as demographic trends in advanced economies are driving asset drawdowns.
According to Moody’s assistant vice president, Rokhaya Cisse, the asset management industry is ripe for consolidation as it is fragmented with the top 10 firms taking 35% of global market share and “oversupply” of mutual funds.
Traditional active management remains out of favour with investors, and fee pressures have been accelerating in commodity-type products. “Especially in the US, larger banks and insurance companies will be formidable bidders for asset managers that can increase their own competitive edge,” Cisse added.
The report added that areas expected to attract asset flows over the next few years include alternatives, ESG, and outcome-oriented products and services, such as managed retirement accounts.
It stated that the overall share of ESG assets under management is small at present but that the potential for growth is “significant”.
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