The credit ratings agency warned that fund management houses are “facing a difficult environment”, citing a lack of growth in assets under management in recent years and a move away from certain asset classes.
According to Fitch, European assets under management in both funds and mandates has remained unchanged at $18trn over the last five years. Furthermore, just 40% of asset managers have seen net inflows over the past three years.
Aymeric Poizot, managing director in Fitch’s fund and asset manager rating group, said: "European asset managers will have to focus on the areas where they are credible, demand is sustained and performance expectations are high.”
Fitch expects asset managers to concentrate on establishing “representative flagship products” in areas where they have proven expertise and demand is expected to be strong. The agency sees qualities such as strong track records, active management styles and diversifying profiles becoming even more important.
Asset management firms are also likely to scale down of investment strategies where demand is weak or where the manager lacks credibility, either through closing funds, outsourcing their management or using funds of funds.
However, Fitch also said asset managers have to invest in new areas at the same time.
Poizot added: “In the next couple of years, investor demand will focus on income generation with credit or real assets, global products and moderate volatility products such as flexible multi-asset, fixed income multi-strategy or low volatility equity.”
Fitch’s call for asset managers to concentrate on their funds were their expertise is proven and demand is high follows recent research by Lipper, which showed the ten most-purchased mutual funds in Europe gained 31% of all net sales in the seven months to the end of July.
Ed Moisson, head of UK and cross border research for Lipper, said this is an example of the “winner takes it all” phenomenon and could explain why asset managers continue to launch products that are similar to existing, popular funds.
