Boston Consulting Group: "Global Asset Management 2017: The Innovator’s Advantage"

From BCG, July 11:

The growing challenges confronting asset management were confirmed by the industry’s global performance in 2016. For the first time since the 2008 financial crisis, the revenue pool of traditional managers fell worldwide, along with their profits. Margins contracted as fee pressures continued to increase.

Assets under management (AuM) returned to growth, largely thanks to rising asset values on financial markets. Net new flows, the industry’s wellspring of growth, remains tepid and little changed from recent years.

In 2017, the environment remains challenging, with the specter of continued outflows from active products and even esoteric long-only asset classes. Meanwhile, the acceleration of new, disruptive technologies will create opportunities for some asset managers while posing threats to others.

With that in mind, we argue in this report that tomorrow’s industry leaders will appear quite different from today’s. To be among them, asset managers will need to seize opportunities to act boldly and transform the very way they work, through innovation that fully embraces advanced technologies such as artificial intelligence, machine learning, big data, and analytics. This will be especially true in investment management and distribution.

Understanding and pursuing opportunities embedded in big market moves will also define success—whether through M&A, partnerships, or gaining entry to promising new markets, such as China. Finally, acting to address costs structurally will differentiate winning managers, whether they take advantage of automation technology or leverage third-party resources.

Those that succeed in making these changes will consolidate their position. Others will increasingly struggle with disruption and turbulence.

These conclusions are among the central themes of this report, The Boston Consulting Group’s 15th annual study of the global asset management industry. They are the result of market-sizing research, an extensive worldwide benchmarking survey, and insights from our client work and other industry activities.

Like its predecessors, this report opens with a detailed and data-based profile of the industry’s overall state of health. It reviews asset management performance, globally and by region, as well as emerging product and competitive trends. The opening chapter concludes with a discussion of the five sources of the most significant gain for players in the years to come: growth in China, product portfolio management and innovation, business models and mergers and acquisitions (M&A), technology, and cost management.

The second and third chapters of this report assess two topics critical to every asset manager’s future growth. The second chapter explores the benefits of optimizing investment management for the digital age. Investment management stands at the crossroads of success and failure as firms race to enhance investment performance while achieving customer-driven innovation, technological prowess, and heightened operational efficiencies.

The third chapter explores the strategic value—and dangers—of M&A for asset managers. As the industry’s economics become more difficult, M&A activity will likely accelerate. Deals will become bigger and more international, raising the stakes and the challenge of postmerger integration....MUCH MORE, including the report download page (40 page PDF)