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Assets under management (AUM) at publicly-traded fund managers may be growing, but margins are declining amid intensifying pressure on industry fees and costs, according to U.S. consulting firm Casey Quirk.

In a new report, the firm says that while total AUM has risen by an average 6.9% annually over the previous three years, preliminary data on public asset managers indicates that operating margins are down from 34% in 2015 to 29% in 2018.

Casey Quirk says the margin decline implies that profits for the entire global investment management industry, including both private and publicly-listed firms, are down by US$29 billion in total for the past three years combined.

This margin compression is coming on the heels of declining fees for both active and passive strategies, the firm notes. It reports that fees for both sorts of strategies are down by an average of 5% annually for the past three years.

“The financial performance over the past several years suggests a secular change is occurring in the investment management industry: asset growth is no longer guaranteed to yield margin enhancement as fee pressure intensifies and costs continue to rise,” said Amanda Walters, senior manager at Casey Quirk.

Notwithstanding these pressures on the industry overall, the firm estimates that about 30% of firms are defying these trends and increasing their margins over the past few years.

“While the industry’s challenges are ample, some firms are separating from the pack by developing competitive advantages in higher-demand investment strategies, shifts in pricing policies, more customization, and the strategic use of data and technology,” Walters said.