After posting average annual returns of 21% for the past 10 years, compared to 9% by the S&P 500, returns of publicly-traded mutual fund companies are going to slow considerably, CBSMarketWatch reports, citing a report by UBS analyst Glenn Schorr.

Schorr’s assessment is based on the projected single-digit performance of the markets over the next decade and how that will likely dampen investor interest. He also foresees alternative investments – such as hedge funds, separately managed accounts and exchange-traded funds – capturing market share from fund companies, noting the increasing pressure to lower fees at a time when funds are being hit with higher costs due to new regulations.

"The great asset land grab is maturing," Schorr said. "The next wave is about trying to profitably grab market share from competitors while protecting against alternative products. In a zero-sum, slower growth environment, it will be increasingly important to choose those asset managers that are positioned to take share or grow internationally."


Schorr said he expects asset managers that already have a number of strengths to emerge as the leaders in this new world order. Specifically, he will look for firms with a broad product lineup, brand recognition, disciplined management and strong market reach and market share. Alternatively, however, he said he would consider recommending "beaten-down asset managers that are emerging from the mud at discounts to the group."

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