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traditional fund houses face us threat

In “Global Asset Management 2013: Capitalizing on the Recovery”, the firm’s eleventh annual survey of the asset management industry, BCG notes rising investor demand in recent years for “specialties, solutions, and passive products”, driven in part by the persistent low interest rate environment.

The trend was evident in fund flows last year, as investors reduced their developed market equity and money market allocations by 5% and 1% respectively. In contrast, the ten biggest-selling strategies in Europe and the US were mostly “specialties or solutions”, such as high yield and multi-asset.

As a result, the leading players in both regions maintained their dominance, owing to their higher concentration in such non-traditional investments. Indeed, the top ten European and US asset managers respectively captured 51% and 94% of total net new fund asset flows (see table, below).

Multi-asset ‘key’

In such an environment, traditional fund houses “have little choice but to try to identify specific areas in which they can build more relevant capabilities”, BCG argues. In particular, investment in multi-asset and specialist skills is vital for firms wishing to compete in the fast-growing solutions sector.

BCG estimates that, by 2016, traditional products will represent just 44% of global assets under management and 30% of revenues – down from 50% and 33% respectively in 2013.

Groups in continental Europe and Asia Pacific face the greatest risk of being left behind. “There, due to the smaller presence of pension funds and endowment businesses, specialties did not develop as much as in the US or UK markets: they weren’t as relevant to mass-retail investors or insurance companies and other institutions with restrictive investment guidelines,” the report notes.

“This gap set the stage for US and UK managers to expand successfully, investing beyond their home markets in continental Europe and Asia Pacific.”

“Global Asset Management 2013: Capitalizing on the Recovery” can be viewed on the BCG website, here (registration required).

US and European winners in 2012
US

Europe

 
Asset manager Net fund flows ($bn) Cum. share of total market net flows Asset manager Net fund flows ($bn) Cum. share of total market net flows
Vanguard 139 35% Pimco 44 13%
Pimco 65 51% BlackRock 29 21%
BlackRock 57 65% Alliance Bernstein 20 27%
JP Morgan Chase 25 72% Nordea 16 32%
DoubleLine Capital 22 77% M&G Investments 13 36%
T Rowe Price 15 81% Axa 13 40%
MFS Investment Management 14 85% BNY Mellon 11 43%
Dimensional Fund Advisors 14 88% Standard Life 11 46%
State Street Global Advisors 13 91% Aberdeen 9 49%
Lord Abbett 12 94% JP Morgan Chase 9 51%
Sources:  Strategic Insight, BCG Analysis

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