- Key industry figures have identified the major
trends impacting the asset management industry since the
financial crisis, and what they mean for its future
- Chief among these issues was a move towards
retail and away from institutional;
- A trend towards passive investment, lower fees,
and demand for asset allocation products also featured
prominently among discussions at last week’s
ICMA annual general meeting;
- The barrage of regulation the industry is facing,
and whether asset managers should be treated the same as
banks, emerged as another key theme;
- But, said one panellist from the Government of
Singapore Investment Corporation, new regulations also
present new opportunities.
A shift away from institutional investors and towards retail
has topped the list of issues impacting the development of the
asset management industry today.
The move is visible in both the pension and life insurance
The global asset management industry continues to adapt to
significant challenges. Indeed, since the financial crisis, and
the wave of regulations that followed, the business of managing
money has been going through
a period of dramatic evolution and structural change.
"If we look at the pension fund market, the trend is towards
personal pensions," said Robert Parker, chairman of the
International Capital Markets Association (ICMA) Asset
Management and Investors Council (AMIC) and head of the
Strategic Advisory Group at Credit Suisse. "In the life
insurance market the trend is towards personal life insurance
The second theme was a
move towards passive or indexed investment.
"I stick very strongly to the view that the exchange traded
fund market will continue to be one of the fastest growing
markets in our industry," said Parker.
Third was the shift towards lower fees - a development that
has been seen for several years. "I think that trend is very
sustainable and therefore overall revenues and the growth rate
will come down," said Parker.
The Credit Suisse head listed the demand for asset
allocation products fourth on the list of the
industry’s concerns. Describing the development of
the markets since the 2008 financial crisis, Parker said the
key demand from clients has been for asset allocation
There has also been a
rise in demand for illiquid assets, which is particularly
the case for pension funds and sovereign wealth funds. These
assets include infrastructure, real estate and private
The development of emerging markets was the sixth landmark
shift the industry is witnessing. One theme over the coming
years will be that global managers will no longer be European
or American or Japanese, said the Credit Suisse strategic
advisory head. "Emerging market managers will be key players in
the global asset management industry," he said.
Seventh on the list of the industry’s most
pressing concerns was
how asset managers perform in a very low yield
"We all know the most extreme case is for those that invest
in Swiss government bonds," said Parker. "If you buy two year
Swiss government bonds, you currently pay 20 basis points per
annum for the right to lend money to the Swiss government."
The final trend Parker identified was the swathe of
regulation the industry is facing. We have to challenge whether
the barrage of regulation facing the investment banking
industry, the markets, and the commercial banking industry,
should apply to asset managers as well, he said, addressing the
audience at the ICMA’s annual general meeting in
Copenhagen last week.
Hunting for yield
Michael Simcock, managing director and head of fixed income,
Europe, at the Government of Singapore Investment Corporation,
identified a further two trends. The first was more active
management of publically-quoted assets. On the private side as
well, he noted more direct management.
"That trend is coming from a need to control costs and,
secondly, the expectation that more active management can add
return," said Simcock.
Second was a move towards much more innovative asset
allocation. This means a move along the risk curve in terms of
both asset range and geographies that sovereign wealth funds
are investing in.
Simcock identified several ways to achieve returns in a low
yield environment. "I think there is an opportunity for
[sovereign wealth funds] in areas that banks have either been
investing or lending in," he said.
"I would say any opportunity, where there’s a
big gap between the economic risk and the regulatory risk
involved in Basel II or Basel III, is up for grabs not just for
[sovereign wealth funds] but for the whole investor community,"
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