The rise of new technology, downward pressures on fees and the growing flow of money from active to passive strategies pose challenges for asset managers who must innovate and transform or risk falling behind their competitors.
Global revenues fell according to the report compiled by the Boston Consulting Group and while AUM rose 7% to $69.1trn, the rise was in large part due to the rises in global markets.
Net new flows, a key measure of organic growth for asset managers, measured just 1.5% in 2016, a sign of struggling times for the industry, according to the report.
The authors examined 153 leading asset managers who hold 62% of global AUM.
Brent Beardsley, head of BCG’s asset and wealth management arm and co-author of the report, said: “Success in the future will require managers to identify opportunities, move boldly, and transform the very way they work.
“Firms that lack a sustainable source of advantage will struggle to survive.”
The industry should embrace technological advances in big data and cut down on structural costs as part of their transformation going forward the report stated.
The Chinese market, where new flows were 17% in 2016, is the one exception to the global slowdown in asset management and will offer key opportunities to mangers, the report added.
Looking ahead to 2017, the report’s authors said outflows from active products and long-only asset classes was set to continue while disruptions from new technology would either open up new opportunities for some while posing a big threat for others.
It said: “We argue in this report that tomorrow’s industry leaders will appear quite different from today’s.
“To be among them, asset managers will need to seize opportunities to act boldly and transform the very way they work, through innovation that fully embraces advanced technologies such as artificial intelligence, machine learning, big data, and analytics. This will be especially true in investment management and distribution.”
