DARIEN, Conn., Feb. 12, 2013 /PRNewswire/ -- Investment managers worldwide will grow less than 1% from net new money annually for the next five years through 2017, continuing a trend that began in 2008 and exacerbating pressures faced by an industry that's also grappling with changing investor needs. As a result, many asset managers, including some of today's market share leaders, may struggle with shrinking revenue and a decaying book of legacy business, according to a new whitepaper from Casey, Quirk & Associates LLC, a leading management consultant to the global asset management industry.
Casey Quirk's report, The Complete Firm 2013: Competing for the 21st Century Investor, outlines a challenging landscape for money managers worldwide, but also predicts most of the industry's future revenue growth will belong to a select group of firms that can innovate by globalizing their portfolios; incorporating alternatives into their investment strategies; orienting their business toward individuals and their growing demand for solutions; and pursuing opportunities in faster-growing emerging markets.
Individuals, not institutions, will drive future growth, according to Casey Quirk, which forecasts that four-fifths of an anticipated US$40 billion of net new revenue over the next five years will come from the increasing wealth of individuals worldwide.
The winning firms over the next five years, according to Casey Quirk, will be those that adapt to the industry's changing dynamics and prove to be skilled at offering one or more of the following:
- Uncorrelated and superior active equity, fixed income and/or alternatives
- Cost-efficient indexing and exchange-traded funds (ETFs)
- Asset allocation expertise, such as multi-asset class solutions, liability-driven investing (LDI), target-date retirement funds, and outsourced investment services
- Selling open-architecture best-in-class solutions
Companies that can develop and enhance those capabilities will win 90% of net new revenue available over the next five years, according to Casey Quirk. Most industry firms worldwide will compete for the remaining 10% of net new revenue, while defending their legacy clients from an increasingly zero-sum takeaway game.
The attributes of the successful firms of the future include investment brand strength; larger sales teams; economic incentives to recruit and retain talent; a global platform; and operating autonomy, said Kevin Quirk, partner at Casey Quirk. "Those unable to develop such traits will struggle, and that includes some of today's market leaders,'' he said.
"Ownership will play a significant role in determining winners and losers,'' said Ben Phillips, partner at Casey Quirk. "Money management bank subsidiaries, firms that are part of multi-affiliate asset management holding companies, and first-generation partnerships are just some examples of companies that will need to grapple with the significant challenges faced in a slow-growth environment."
"Over the past three decades, favorable demographics and market appreciation generated strong revenue and handsome profit margins for asset managers worldwide,'' Quirk added. "In the next five years, we expect the growth to slow, investment firms to be tested, and market leadership to change dramatically.''
To obtain the full report, please visit www.caseyquirk.com.
About Casey, Quirk & Associates LLC
Casey Quirk is a management consultant that focuses solely on advising investment management firms. Casey Quirk's work with senior leadership teams includes broad business strategy reviews, investment positioning and strategy, market opportunity evaluations, organizational design, ownership and incentive structuring, and transaction due diligence. In the past five years, Casey Quirk has advised a majority of the top 25 investment management organizations worldwide. For more information please visit www.caseyquirk.com.
SOURCE Casey, Quirk & Associates LLC