The global asset management industry enjoyed strong growth in 2017 and firms should capitalize on this to invest for future growth, says a new report from Boston Consulting Group (BCG).
Global assets under management (AUM) grew by 12% in 2017 to US$79.2 trillion, which represents the sector’s strongest growth in a decade, since the post-crisis rebound, the report states.
Growth in AUM was powered largely by market performance, rather than sales.
“Most of the bounce-back growth of 2017 was market driven, not structural. Cost pressures and fee erosion will persist, especially when equity-market growth slows, as it shows signs of doing in 2018,” says Renaud Fages, partner at BCG, in a statement.
Passive products continued capture share from active managers, the report states. In 2017, passive products saw AUM grow by 25%, and “smart beta” products could pose a bigger threat to active managers in the years ahead.
“Asset managers that choose to join the smart-beta bandwagon now will need to achieve scale and develop an industrialized approach if they want to be competitive,” says Hélène Donnadieu, principal with BCG and global manager of the asset management segment, in a statement.
China and the United States were the leading markets for AUM growth, the report states. China posted 22% growth in AUM, and BCG expects that to continue in the years ahead. “We expect China’s AUM to triple by 2025, which — if it comes to pass — would make the Chinese market the second-largest after the U.S.,” says Qin Xu, partner at BCG, in a statement.
Additionally, on the strength of this recent growth, the report recommends that asset managers should be investing, to help power future gains, particularly in technology. “Asset managers would be wise to take advantage of a strong year to reinvest capital and talent in future growth,” adds Fages.
“Few asset managers, however, have mastered digital and analytics at scale,” says Brent Beardsley, a senior BCG partner, in a statement. “That requires significant and sometimes complex organizational change. Most firms will need to adopt agile ways of working to achieve that goal.”