The world fund industrys profits may be halved over the next few years, according to a survey of asset management firms by the
Industry profitability could fall to $20 billion a year from $34 billion in 2002, or from 11 basis points of assets under management to six basis points, according to the report. As well, annual compound growth rates could range from 0.7% to 6% through 2006, compared with annual rates of 14% between 1995 and 2000.
The survey included 40 large asset management firms, whose holdings equal around $8 trillion dollars spanning the globe.
The most profitable firms are likely to break even or take, at most, 11 basis points on assets managed, while firms whose assets barely grow could see their profitability plummet 45% from last years level.
There is an impending battle for market share amongst fund firms in an increasingly difficult market, Andy Maguire, author of the survey, told Reuters.
Last year, investment management firms around the globe saw their assets decline 8% to $31 trillion, Boston Consulting found. As well, the firm found that 40% of global asset management firms are currently taking losses or barely avoiding being in the red. Another 30% reported profits of zero to 19%, and only 10% were reporting profits of 50% or more.
The report also found that the structure of the market has a significant impact on revenue. For example, the United States and Britain work in an open market system with large numbers of independant players and a primarily non-restrictive product distribution system. However, funds in continental Europe largely rely on banking and insurance groups for distribution, which restricts the inflow of revenue. Britain was at the top of the charts when it came to nations with the most declining assets, with a 17% reduction from 2001 to 2002.
