Asia-pacific has the fastest growing AMC business in the world, says BCG’s thirteenth annual report of the asset management industry titled ‘Global Asset Management 2015: Sparking Growth with Go-to-Market Excellence.’
The report shows that this growth is primarily driven by India and China. “Asia-Pacific remained the fastest-growing region, led by China and India, according to BCG’s report, which devotes its third chapter to discussing the growth potential of the industry’s overdue shift and rebalancing to that region,” said the press release issued by the company.
“The industry’s growth in Asia-Pacific will be increasingly driven by wealth and retirement savings,” said Nick Gardiner, a Hong Kong-based BCG partner and a coauthor of the report. “Asia—and particularly China—is on the verge of a shift toward retirement offerings, reflecting demographic trends and upcoming pension reforms.”
“Ranked at number 6 in Asia, India is demonstrating its high growth potential” says Ashish Garg, Partner & Director at BCG India. “Net inflows in calendar year 2014 at 5.4% (as % of 2013 year end AuM) were much higher than developed markets across US, Europe and Japan but much lower than China. High growths will continue to come from Asia Pacific. Worldwide asset managers are under pricing pressure for most product categories, and by both institutional and retail customer segments. However, asset managers are responding to the challenge. They have maintained a healthy profit margin (39% as percentage of revenues). Asset managers are building capabilities around marketing effectiveness, sales force productivity and enhanced customer experience. Many asset managers are also investing in digital capabilities and data analytics,” he added.
Overall, the asset management industry’s global profits and assets have risen to record levels. Worldwide assets under management (AUM) grew to $74 trillion in 2014—a third consecutive annual record. The industry’s profit pool rose to match its historic peak of $102 billion, achieved before the financial crisis.
“The 2014 performance shows that the industry has moved beyond the dynamics of the post crisis period but also that it faces a challenging new environment,” said Gary Shub, a Boston-based BCG partner and a coauthor of the report. “Asset management continues to rank among the world’s most profitable businesses, and it’s a growing one for managers that get it right,” he added.
However, the report notes that growth in AUM and profitability is largely due to rising asset values on global markets (mark to market gain) rather than new asset flows. Net inflows remained subdued in 2014 and well below pre-crisis levels. Also, a major portion of net inflows went to passively managed funds rather than actively managed funds.
Operating margins, or profits as a percentage of net revenues, which reached a high of 41 percent before the crisis, remained flat at 39 percent in 2014, says the report. Net revenue growth fell short of overall AUM growth because of pressure on fees paid to managers in both the retail and institutional segments of the business, the study found.
The report has suggested that AMCs are required to ramp up their go-to-market efforts, notably through data-driven capabilities to secure future growth.
