The asset management industry is set to undergo significant consolidation in the next four years, with one in six companies expected to disappear or be acquired by larger groups according to a recent survey conducted by PwC UK. The survey, which involved 500 asset managers and institutional investors, also revealed that nearly three-quarters of asset managers are considering mergers or acquisitions due to market pressures. The industry is experiencing cost and margin pressures, leading managers to assess their critical mass and ability to withstand competition from larger players. Asset managers have suffered a significant decline in assets, and market volatility, interest rates, and inflation are cited as contributing factors. The survey predicts that the top 10 traditional asset managers will control half of all assets going into mutual funds by 2027, and robo-advisory services are expected to manage $6tn by the same year. Fees are anticipated to continue declining, benefiting larger players with the capacity to absorb lower fees.
With a predicted fall in ability to charge fee, transparency around cost drivers helps managers and asset owners to control costs in the short term but also potentially adjust their operating models to reduce cost on an ongoing basis.