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The game changers
As the global asset management industry progresses towards a significant moment in its evolution, PwC has identified six dynamics that should be analyzed and addressed to capitalize on emerging opportunities:
- Asset management moves center stage: The changing focus of banks and insurance companies and shifting demographics/markets could propel asset management from the shadows to the forefront. However, rising assets and prominence are typically accompanied by rising costs. As the asset management industry expands and becomes more visible, new investments in data, technology and talent may be needed to respond to heightened regulatory and competitive pressures. These expenses could continue to burden profits, which, according to industry analysis, are still 15-20 percent below their pre-crisis levels.
- Distribution is redrawn – regional and global platforms dominate: By 2020, four distinct regional fund distribution blocks in
North Asia, South Asia, Latin Americaand Europeare expected to develop regulatory and trade linkages with each other, reshaping the way that asset managers view distribution channels. North American asset managers may need to evaluate their strategy to consider the impact of these linkages.
- Fee models are transformed: By 2020, it is likely that major territories with distribution networks may look to introduce regulations to better align interests for the end-customer, which may place more transparency pressure on asset managers and have a substantial impact on the cost structure of the industry. In the US, asset managers are facing the unique confluence of imminent mass retirement and growing healthcare costs which is likely to shift investment strategy towards longer term wealth accumulation with more emphasis on fixed income and income generating assets.
- Alternatives become more mainstream, passives are core and ETFs proliferate: Traditional active management should continue to be the core of the industry as the rising tide of assets lifts all strategies and styles of management. However, traditional active management could grow at a less rapid pace than passive and alternative strategies, and the overall proportion of actively managed traditional assets under management is likely to shrink. PwC estimates that alternative assets will grow by some 9.3 percent a year between now and 2020, reaching
- A new breed of global managers: By 2020, the industry is likely to see the emergence of a new breed of global managers, one with highly streamlined platforms, targeted solutions for the customer, and a stronger and more trusted brand. These managers will not only emerge from the traditional fund complexes, but from among the ranks of large alternative firms as well.
- Asset management enters the 21st century: Today, asset management operates within a relatively low-tech infrastructure, but by 2020 technology may become mission critical to customer engagement, data mining for information on clients and potential clients, operational efficiency and regulatory and tax reporting. Moreover, cyber risk will intensify, ranking as a top priority alongside operational, market and performance risk.
"Amid unprecedented economic turmoil and regulatory change, most asset managers have not had time to bring the future into focus," said
Overarching trends fueling growth
According to the report, the asset management environment is being reshaped by the convergence of several significant global megatrends including demographic changes, accelerating urbanization, technological breakthroughs and shifts in economic power. At the client level, PwC predicts that global growth in assets will be driven by three key factors:
- The increasing use of defined contribution (DC) plans partly driven by government-incentivized or government-mandated shift to individual retirement plans.
- The increase of mass affluent and high-net-worth-individuals in the SAAAME (
South America, Asia, Africa, Middle East) regions where economies are set to grow faster than those in the developed world in the years leading up to 2020.
- The expansion and emergence of new sovereign wealth funds (SWFs) with diverse agendas and investment goals.
In 2012, the AM industry managed 36.5 percent of assets held by pension funds, sovereign wealth funds, insurance companies, mass affluent and high-net-worth-individuals. If the AM industry is successful in penetrating these clients assets further, PwC believes that share of managed assets can increase by 10 percent to a level of 46.5 percent, which would represent
Pension fund assets in
PwC estimates that by 2020, pension fund assets in
Pace of growth among mass affluent and high-net-worth-individuals (HNWI) in
Overall, assets held by mass affluent (wealth between $100,000 and
While emerging wealth economies in the SAAAME regions will likely serve as the dominant catalyst for growth,
Sovereign wealth funds present a new nexus of opportunity
The size of SWFs is rising fast and their presence in international capital markets is becoming more prominent. AuM for SWFs is currently above
"Responding to the impact of the global megatrends and the game changers we've identified will require considerable thought in order to create a great strategy – there is no silver bullet to building the successful asset manager of 2020 and beyond," said
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SOURCE PwC US