In 2014, the global value of professionally managed assets grew to $74 trillion—the third consecutive annual record—and the industry’s profits rose to match their historic peak of $102 billion. Operating margins remained steady, sitting just below the record level achieved before the financial crisis.
These data points, among others, offer an encouraging snapshot of the global asset-management industry. A more complex portrait emerges in the full details of this report—Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence, The Boston Consulting Group’s thirteenth annual study of asset management worldwide.
This report begins by profiling the industry’s overall evolution in 2014. In the article “The Asset Manager’s Go-to-Market Survival Guide,” , we discuss how leading managers are improving their go-to-market approach, in particular through more data-driven decision making. These findings were supported by an in-depth measurement of managers’ capabilities based on BCG’s framework for excellence in go-to-market functions—including market intelligence, product development, client communications, sales coverage model, sales performance monitoring, and organization setup and incentives. Finally, in the article “Catching Asset Management’s Tilt Toward Asia,” we offer a deep dive on the expanding opportunities in Asia-Pacific and how managers can access them.
Professional asset management continues to rank among the world’s most profitable businesses, and it’s a growing one for managers that get it right.
The past year’s performance shows that the industry has moved beyond the dynamics of the postcrisis period. At the same time, a new competitive environment is coming into sharper focus. It is a challenging environment.
Although the industry’s profit pool rose 7 percent to $102 billion, matching its historic peak, those profits, once again, were largely driven by rising asset values on global markets. Growth driven by net new assets remained unchanged from the year before, at 1.7 percent of assets under management (AuM). Net flows, the lifeblood of growth, are likely to remain in the low single digits—well below precrisis levels. At the same time, net revenue growth fell short of the growth of average AuM as pressure on fees squeezed price realization.
This isn’t the first year that fee pressure has contributed to declining revenue margins. Institutional investors are monitoring fees more closely, challenging and renegotiating them. In the retail segment, channel consolidation and increasing transparency driven by regulation are driving fees lower.
The product shift of recent years—from traditional actively managed products to passives, solutions, and specialties—held true in 2014. This structural shift will continue in the medium term, we believe, squeezing the share of active core products and managers.
The gap in business performance by segment widened between managers in the retail market and those in the institutional market. For the second year in a row, retail-focused managers outperformed those focused on institutional markets by relatively wide margins in AuM, revenue, net flow, and profitability growth.
Whatever their segment or product focus, asset managers today face a future in which growth isn’t a given. Superior investment performance does not guarantee greater market share. The dynamics of competitive advantage have changed.
Achieving growth will require managers to ramp up their execution game in order to differentiate themselves. In particular, they will need to generate more value through end-to-end, go-to-market efforts —from design to execution—by leveraging their marketing, sales, and pricing capabilities.
Although the traditional framework for maximizing go-to-market performance remains intact, the competencies needed to achieve excellence are shifting. In many cases, the winning managers gain advantage by developing and deploying advanced capabilities in data-driven decision making.
Many of today’s most effective managers focus their efforts on three capabilities: marketing effectiveness, sales force productivity, and enhanced customer experience.
In addition to sparking growth through their go-to-market capabilities, asset managers should look for growth potential in Asia-Pacific as the industry rebalances toward that region. That shift is already overdue, and there is plenty of room for more growth, as we discuss in the article “Catching Asset Management’s Tilt Toward Asia.”
How should managers access this opportunity? Asia-Pacific must be approached as a set of diverse markets. Differences in market maturity, scale, regulation, demand, and channel economics make Asia a complex environment, where each opportunity is paired with its own challenges and success factors.
If global managers get only one market right, it must be China. Still, gaining access to China’s domestic investors can be complex.
This report, like its predecessors, is the product of market-sizing research and an extensive benchmarking survey. The benchmarking involved 135 leading asset managers—representing $39 trillion, or 53 percent, of global AuM—and covered more than 4,000 data points per player. The aim of our annual research is to gain insights into the state of the industry and its underlying sources of profitability to help managers build prosperous paths to the future.
The additional assessment of go-to-market functions conducted this year, noted above, covered managers’ organization setups across those functions, product innovation metrics, sales and marketing efficiency ratios, incentive policies and drivers, performance-monitoring metrics, use of advanced data analytics including big data, and digital and social-media metrics.