Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Global industry downturn for first time since GFC
Jeffrey Levi
Muted net flows into investment strategies were insufficient to overcome negative market performance worldwide in 2015, resulting in lower global assets under management, revenue, and operating margins for the first time since the financial crisis of 2008-2009.
According to preliminary data from Casey Quirk & Associates, a specialist management consultant to asset managers around the world, global assets under management fell 2.4 per cent, to US$65 trillion last year from US$67 trillion in 2014.
Revenue slid 2.9 per cent to US$309 billion from US$319 billion and median operating margins fell back to 32 per cent in 2015, matching the median levels achieved in 2012 and 2013, but trailing the 34 per cent generated in 2014.
Net flows globally in 2015 wilted to 1.6 per cent, from 2.6 per cent in 2014, according to Casey Quirk.
As discussed in a recent paper, “The Roar of the Crowd: How Individual Investors Transform Competition in Asset Management,”Â
Casey Quirk estimates that global asset management industry net flows will average only 1.7 per cent a year from 2015 through 2020.
Jeffrey Levi, Casey Quirk partner and head of the firm’s ‘Knowledge Centre’, said: “2015 is in fact emblematic of the ‘new normal’ we see emerging in the industry. Beyond a low-growth environment and fee pressure, investment management leaders are confronting a broad industry shift in which individual investors are the primary source of new revenue,” he said. “Going forward, industry leaders will differentiate themselves through product development, brand, specialized client engagement, and risk management.”
Indeed, individual investors are driving the large moves to passively managed index funds and ETFs. Casey Quirk estimates that net flows into passive investments totaled US$747 billion in 2015, more than double the US$312 billion of net money into active strategies.
Since 2009, when passive funds had an 11 per cent share of the overall market, that segment has grown by almost 73 per cent, and now represents 19 per cent of the total global asset management market in 2015. Active strategies, which enjoyed an 89 per cent market share in 2009, now represent 81 per cent of the total market, according to Casey Quirk estimates.
