SOURCE: The Boston Consulting Group

The Boston Consulting Group

July 07, 2015 12:00 ET

Asset Managers Achieve Record Profits and Assets, but Fee Pressures Rise

The Industry's Assets and Profits Climb to Record $74 Trillion and $102 Billion, Respectively, BCG Study Finds; But Client Pressure on Fees Impact Net Revenues, and New Flows Stall, so "Growth Is Not a Given"

NEW YORK, NY--(Marketwired - Jul 7, 2015) - The asset management industry's global profits and assets have risen to record levels, but securing future growth will require managers to ramp up their go-to-market efforts, notably through data-driven capabilities, according to a new report by The Boston Consulting Group (BCG).

Worldwide assets under management (AuM) grew to $74 trillion in 2014 -- a third consecutive annual record -- according to BCG's thirteenth annual report of the asset-management industry, titled Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence.

The industry's profit pool rose to match its historic peak of $102 billion, achieved before the financial crisis, BCG found.

"The 2014 performance shows that the industry has moved beyond the dynamics of the postcrisis period but also that it faces a challenging new environment," said Gary Shub, a Boston-based BCG partner and a coauthor of the report. "Asset management continues to rank among the world's most profitable businesses, and it's a growing one for managers that get it right."

Managers' asset growth -- and their record profits -- continued to be largely the result of rising asset values on global markets rather than new asset flows, BCG's report notes. Net new flows as a percentage of prior-year assets remained unchanged in 2014 -- and well below precrisis levels -- after achieving the strongest postcrisis levels for two years in a row. Net flows remained a modest part of total growth, and most of those flows went to passives, solutions, and specialties rather than traditional actively managed products.

Operating margins, or profits as a percentage of net revenues, which reached a high of 41 percent before the crisis, remained flat at 39 percent in 2014 -- after growing the year before, according to BCG. Net revenue growth fell short of overall AuM growth because of pressure on fees paid to managers in both the retail and institutional segments of the business, the study found.

"Managers face a future in which growth isn't a given," said Brent Beardsley, a Chicago-based BCG senior partner, global leader of the firm's asset and wealth management segment, and a coauthor of the report. "Achieving growth will require managers to ramp up their execution and generate more value from their commercial go-to-market capabilities -- notably in marketing, sales, and pricing."

Some managers are finding success by improving their go-to-market approach through advanced capabilities in data-driven decision making, including use of big data, the report says. Many of the most effective managers focus on three capabilities: marketing effectiveness, sales force productivity, and enhanced customer experience. The findings were drawn from a benchmarking study based on BCG's framework for go-to-market excellence, which assessed functions including market intelligence, product development, client communications, sales performance, and organization setup.

Europe's Net Flows Rebound
In terms of growth by region, Europe's net flows rebounded for the first time since the crisis, catching up to those in the U.S., the report says. Growth was driven by Spain and Italy, but Scandinavian and German markets also achieved solid advances.

Asia-Pacific remained the fastest-growing region, led by China and India, according to BCG's report, which devotes its third chapter to discussing the growth potential of the industry's overdue shift and rebalancing to that region.

"The industry's growth in Asia-Pacific will be increasingly driven by wealth and retirement savings," said Nick Gardiner, a Hong Kong-based BCG partner and a coauthor of the report. "Asia -- and particularly China -- is on the verge of a shift toward retirement offerings, reflecting demographic trends and upcoming pension reforms."

Performance by managers, viewed regionally, achieved an unusual global balance in 2014, with relatively narrow differences in growth of AuM, revenues, and profit. "This was a change from recent years, when U.S.-based players generally outperformed those in other markets," said Hélène Donnadieu, a Paris-based BCG principal, global manager of the firm's asset management practice, and a report coauthor.

The most significant difference among managers was the higher performance of those focusing on the retail segment. Retail-focused managers outperformed institutional managers by relatively wide margins in AuM, revenue, net flow, and profit growth.

In last year's study, BCG reported that the industry in 2013 had recorded its strongest year of recovery since the financial crisis, as assets reached record levels and profits surged to near-all-time highs.

Global Asset Management 2015, like its predecessor reports, is based on BCG's market-sizing research and an extensive 2015 benchmarking survey covering fees, products, distribution channels, operating systems, and costs that provided insights on the industry's underlying sources of profitability. The benchmarking involved 135 leading asset managers, representing 53 percent of global AuM. The research focused exclusively on assets that are professionally managed for a fee.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 82 offices in 46 countries. For more information, please visit bcg.com.

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Contact Information

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    Eric Gregoire
    Global Media Relations Manager

    Tel +1 617 850 3783
    Fax +1 617 850 3701
    gregoire.eric@bcg.com