As the asset management industry will inevitably face more regulations, costs will increase and competition will intensify, giving the largest companies an advantage that will increase their market share. Those were some of the views of 225 asset managers from 30 countries that Create Research surveyed. The study was commissioned by Citis global transaction services group and Principal Global Investors.
Seventy percent said they expect the asset management industry to become more polarized, with large players rising to positions of dominance. Thirty-four percent said clients are more averse to risk and more inclined to seek capital protection through standardized products.
Forty-nine percent of executives also expect more consolidation through mergers and acquisitions and more streamlining across front, middle and back offices in order to realize efficiencies and lower costs. Asset managers are also likely to decouple manufacturing and distribution and outsource more administration functions to adopt variable-cost models, as needed.
As far as the products asset managers offer are concerned, asset managers need a new narrative on what they stand for and what they deliver, said Amin Rajan, CEO of Create Research.
Jim McCaughan, CEO of Principal, added: Over a span of nine years in this decade, clients of all kinds have been badly burned by two of the four worst bear markets in the last century and are now demanding all-weather products, which place capital protection at the core. Those asset managers who understand and cater to their clients risk appetite and changing needs in this new environment will stand at the vanguard of the industry, when markets recover.
The asset management industry stands at a crossroads as it emerges from the recent meltdown. A business model that cannot absorb further market shocks will be untenable, since further turbulence cannot be ruled out, Rajan said.