Asset managers face challenges despite record profits

The industry’s profit pool rose to match its historic peak of US$102 billion, achieved before the financial crisis, BCG found.

However, strong asset growth and record profits are largely due to market returns rather than new asset flows, the report noted.

Net new flows remain well below pre-crisis levels, BCG reports, and most of those new flows went to passive products, packaged solutions, and other specialty products, rather than traditional actively managed products. Operating margins remained flat from the previous year at 39% in 2014, it says.

By region, Europe’s net flows rebounded for the first time since the crisis, where growth was driven by Spain and Italy, BCG reports. Asia-Pacific region remained the fastest-growing area, led by China and India.

Within the industry, retail-focused managers outperformed institutional managers by relatively wide margins in AUM, revenue, net flow, and profit growth, BCG reports.

Looking ahead, there are some major challenges facing the industry, according to the report. “Managers face a future in which growth isn’t a given,” said Brent Beardsley, a Chicago-based BCG senior partner, and a co-author of the report. “Achieving growth will require managers to ramp up their execution and generate more value from their commercial go-to-market capabilities — notably in marketing, sales, and pricing.”

According to the report, many of the most effective managers focus on three capabilities: marketing effectiveness, sales force productivity, and enhanced customer experience. And some managers are finding success by using more data-driven decision making, including use of big data.