Despite Some Signs of Market Recovery, a Record Number of Investors Are Ready to Switch Asset Managers; Strategic Business-Model Review and Fast Action Are Needed to Ensure Asset Managers' Future Viability, BCG Says

NEW YORK, NY -- (Marketwire) -- 07/06/09 -- Global asset managers, reeling from declining asset pools and client attrition, must take bold steps to strengthen their businesses if they hope to weather the current financial crisis and gain competitive advantage for the postcrisis era, according to a report released today by The Boston Consulting Group (BCG).

The new report, "Conquering the Crisis: Global Asset Management 2009," BCG's seventh annual study of the global asset-management industry, draws on a detailed benchmarking of leading competitors. The report also includes a comprehensive market-sizing study covering 32 countries (representing more than 95 percent of the global asset-management market), as well as a detailed analysis of the forces that are shaping the fortunes of the industry worldwide.

According to the report, the value of professionally managed assets fell globally by 18 percent to $48.6 trillion in 2008. This sharp decline followed average growth of 12 percent per year from 2002 through 2007. Sliding equity markets around the world were the primary driver of the decrease, with only a few countries emerging relatively unscathed.

The report says that deteriorating industry economics will force asset managers to live with lower profits in the future. The average profit (operating margin) of asset managers fell to 34 percent of net revenues at the end of 2008 -- the lowest level in five years -- from 38 percent a year earlier. A more complete profit impact will be felt in 2009, with average operating margins likely falling to 30 percent or lower. Overall, about 80 percent of asset managers suffered profit declines in 2008, while about 70 percent witnessed revenue decreases as well.

The report highlights the fact that the subpar performance of many products that were recommended by investment advisors has led some investors to question both their advisors' judgment and the products themselves. The overall damage has been worse than that inflicted by the bursting of the dot-com bubble early in the decade because more investors have been hurt in asset classes presumed to be reliable. In the future, institutional investors will require more product transparency and will not be willing to pay higher fees for actively managed products that deliver returns similar to those of passively managed products. Retail investors will also be looking for greater product transparency and more insightful advice. Regulators, for their part, will be scrutinizing the investment industry far more closely.