Next year could be a
“defining year” for the global asset management industry, believes
fund management company Skandia Investment Group (SIG), a unit of
UK life insurer Old Mutual. SIG draws its conclusion from a survey
40 UK fund management groups with combined assets under management
of more than $2trn.
Among the most significant
findings of SIG’s survey are potential changes to fee structures
with the majority of the industry (64%) expecting to see the use of
performance fees increase further over the next 12
months.
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Increasing
pressure
In addition, the same
proportion of respondents indicated that in some areas of the
market annual management charges will be under increasing pressure
as a direct result of the rise of passive products including
exchange traded funds (ETF).
“Fees are also likely to
become more competitive in certain areas of the market as firms
react to the continued rise in popularity of passive products such
as ETFs,” said SIG CEO Nils Bolmstrand.
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By GlobalData“The increased availability
of low-cost sources of beta; increased client demand for absolute
returns after recent market volatility; and the rarity of genuine
alpha is likely to drive the polarisation in fees demonstrated by
the asset managers surveyed.”
Asset managers can also
expect to come under more regulatory pressure.
“The burden of regulatory
change shows no signs of diminishing, with 85% of respondents
expecting to spend more time managing regulatory issues over the
next 12 months,” noted SIG.
SIG also stressed that a
clear and likely permanent shift would appear to be in the area of
risk targeted funds, with investors looking for more certainty in
terms of risk rather than returns.
In this regard, 62% of
respondents expect the level of demand for risk targeted funds to
increase in 2011 while none of those questioned thought demand
would decrease.
A similar trend was seen with
multi-manager investing, where only 12% felt the growth seen in the
last few years would go down. 62% felt the fastest growth for
multi-manager investing would be seen in the retail
market.
Of particular significance,
SIG’s survey also revealed the use of investment product
distribution platforms by asset managers “is set to surge over the
next three years”.
The findings revealed many
asset managers already see platforms as an important distribution
channel, with 71% of those surveyed transacting at least a quarter
of their retail business through a platform and 43% transacting
over half.
Notably, the vast majority of
respondents (79%) believe their business will see a further
increase in the use of platforms over the coming years.
SIG also highlighted that
consolidation remains at the forefront of many asset management
companies’ minds, with 76% of respondents expecting to see
increasing consolidation over the coming year.
Positive
outlook
Of this number, more than
half (55%) believe it will be led by large asset management
companies looking for cost synergies through the purchase of their
competitors or boutiques. Because of consolidation activity, of
those surveyed, 53% expect to see a reduction in the number of
boutiques (asset sector specialists) over the coming
year.
Summing up the survey
results, Bolmstrand said: “One of the most gratifying aspects of
this year’s survey is just how positive the fund management
industry actually is, despite the very obvious
headwinds.
“Most firms we questioned are
upbeat about the state of the industry and anticipate growth in
assets under management in 2011 as they look to expand into new
markets.
“The over-riding feeling from the survey is that 2011
could be an extremely important year for the asset management
industry, with firms positioning themselves to benefit from an
unfamiliar future.”
