According to a forecast by management consultancy PwC, around 16 percent of asset and wealth managers will either merge or disappear from the market by 2027. This consolidation is mainly a result of increasing digitization, changing investor expectations and an increased focus on retail customers. The industry is also worried about inflation and volatility in the capital markets.
Another driver of this development: In 2022, the profits of the fund companies in Western Europe fell by around 20 percent. This was mainly due to the fall in prices on the stock exchanges, caused by geopolitical tensions and economic problems. Assets under management in Western Europe fell by around 15 percent, resulting in a negative net cash flow. Most asset managers had invested too little in their operating models and IT in the good years and were now surprised by the falling revenues and stable cost basis.
The big ones are set to get even bigger, and the little ones will be swallowed or disappear!
PwC predicts one consequence of these market adjustments: the large houses will gain even more weight in this upheaval. It is forecast that in a few years, the top ten firms will hold half of the global fund market and are expected to control half of the assets managed in investment funds worldwide. This trend is also supported by the increasing importance of new technologies such as big data, artificial intelligence and blockchain.
Industry Trends: Technology & Sustainability
Important technological trends in the industry include new technologies such as big data, artificial intelligence or blockchain. This trend plays into the hands of the big industry players, who can afford an army of specialists. Another important element is the increasing importance of sustainability criteria in portfolio management. 60 percent of asset managers consider the introduction of sustainable investment strategies to be essential. And another trend: over the long term, the face of the asset management industry is changing due to the trend towards exchange-traded funds and private market investments such as private equity.
The PwC experts conclude that overall, the asset management industry is facing great challenges, but at the same time it is well equipped to master the change.