Mergers between global asset management firms are likely to accelerate throughout 2018 as low-cost passive strategies continue to put pressure on margins, predicts Deloitte. Growing margin pressure could see 2018 record the highest M&A deal value for the investment management sector, according to a new report by Deloitte. Deloitte’s 2018 Investment Management Outlook outlined a number of key challenges in the year ahead for professional money managers.
Fund managers will have to adapt to changing customer preferences, which (with the emergence of Millennials) could experience a “quantum shift” as opposed to the incremental changes the industry has seen in the past decade, said Deloitte. In addition, with investors favouring low-cost strategies at present, the onus will be on fund managers to “make the case” for alpha and active management in general, said the report. “The average investment management firm will likely be less profitable and have roughly the same assets under management (AUM) at the end of 2018 as in the beginning, even in a continuing bull market,” predicted Deloitte.
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