Good news—global assets under management will continue to rise for the foreseeable future. Bad news (at least for advisors)—so will fee pressure.
Cerulli Associates finds pressure on profit margins 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 at Cerulli Associates, said in a statement. “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.
ESG investing
A key trend in all regions covered by Cerulli is the rise of environmental, social, and governance (ESG) investing.
“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,” Justina Deveikyte, associate director of institutional research at Cerulli, added. “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.