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Asset managers around the world need to find ways to combat increasing fee pressure caused by growing competition and new regulation
August 2019, LONDON - Global assets under management (AUM) will continue growing for the foreseeable future, but so will pressure on profit margins, according to Cerulli Associates latest report, Global Markets: Bringing Clarity to an Uncertain World. Fee pressure will continue as firms around the world seek to add new markets, product offerings, and investment capabilities. Furthermore, the influence of societal change is increasingly being felt within asset management and global players are paying ever more attention to China, India, and Latin America.
“Decision-makers in the asset management industry are having to weigh a wide variety of factors, including regulation, fee compression, persistently low yields, and political and economic uncertainty,” says André Schnurrenberger, managing director, Europe at Cerulli Associates. “In addition, we are increasingly seeing regulators seeking to promote investment, particularly saving for retirement, and several countries have introduced legislation that seeks to make the industry more transparent and user friendly.”
Regulators are assisted in their efforts by the fact that the pace of digitalization is quickening. Many managers are making greater use of artificial intelligence, machine learning, and big data to provide services to clients. Advances in robo-advice and passive investing continue to reshape the fund management landscape, widening access to investment services.
A key trend in all of the regions covered in the report is the rise of environmental, social, and governance (ESG) investing. Justina Deveikyte, associate director, European institutional research at Cerulli, says, “We are bullish on the long-term prospects of success when it comes to ESG integration and see shifting demographics and the impending intergenerational wealth transfer as causes for optimism. Investors under age 40 prefer strategies that incorporate ESG and many investment platforms are recording an increasing number of searches for ESG solutions.”
Although more education on these products is needed, Cerulli believes that asset management firms will be well placed to succeed if they can market ESG solutions effectively by demonstrating how they fit into the overall objectives of client portfolios.
France is one of the most dynamic markets in Europe when it comes to ESG investing. Cerulli’s asset manager survey found that 56% of respondents in France anticipate fast growth in ESG assets, and 39% anticipate moderate growth. This trend is also evident in the U.K.: the survey found that 32% of respondents in the country foresee rapid growth in ESG assets and 42% expect moderate growth. Hong Kong’s Securities and Futures Commission has taken the lead in Asia ex-Japan with respect to ESG investing and aims to launch a website of green or ESG funds by the end of 2019 to make such funds identifiable. Japan’s Government Pension Investment Fund continues to invest according to ESG principles and requires external managers to comply with such principles for domestic and foreign equities, and Taiwan’s Bureau of Labor Funds launched its maiden domestic ESG equity mandate, worth NT$42 billion (US$1.3 billion), last year.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—Global Markets 2019: Bringing Clarity to an Uncertain World. This report has been created to meet client demands for regularly updated information regarding Cerulli’s opinions on asset management marketplaces across the globe.
Each issue of Cerulli’s Global Markets report aims to focus on events occurring in and intelligence gathered over the annual review period. This iteration, issued in mid-2019, covers a review period extending from January 2018 to December 2018 inclusive. Some of the qualitative analysis also takes into account events and news that occurred in the first few months of 2019.
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