European Asset Management Study
Our simulation of asset managers of all sizes and investment strategies (active/passive) forecasts that globally earnings and costs will continue to rise simultaneously. Both our base-case and worst-case scenarios suggest that average profit margins of the 41 largest asset management players in Europe could fall by anywhere between 13% and 40% from 2023 to 2027. However, our best-case scenario forecasts that profit margins could increase by 55% if costs stabilize after they have been rising continually for years and that net new money will grow at levels seen from 2018 to 2022.
Looking at assets under management and net new money, the geopolitical and economic shocks of Russia’s war against Ukraine, rising inflation and tighter monetary policy in 2022 reversed the financial market gains of recent years which resulted in a decline of global assets under management since 2018.
To survive the industry upheaval that began in 2022, asset managers in Europe must abandon the comfort zone created by the upward economic trajectory of recent years where global markets rose continually and interest rates were still at close to zero levels.
However, the European asset management industry does appear increasingly aware of the challenges ahead. Our survey found, for example, that roughly 80% of asset managers expect clients to save less, 44% anticipate reduced interest in real estate, and 60% expect increased demand for digital assets like cryptocurrencies.
In response to client demands, some 40% said they were planning to change their sales strategy in the short- to medium-term, while a little over 70% said they saw automation through digitalization as a crucial step toward raising production efficiency.
We have used the findings of our performance analysis and survey to formulate four key recommendations: address young affluent clients with attractive products (B2C and B2B2C), maintain distributor partnerships, increase alternative asset class offerings, and embrace comprehensive digitalization along the entire value chain to manage rising costs and a shortage of skilled workers.
