Worldwide money managers' total assets under management reached a record $62.4 trillion in 2012, surpassing the $57.2 trillion set in 2007 before the 2008-2009 financial crisis, according to a Boston Consulting Group study released Tuesday.
Also, managers' operating margins rose to an average 37% of net revenues and profit increased to $80 billion, although it remained roughly 15% below pre-crisis highs, according to the annual study, “Global Asset Management 2013: Capitalizing on the Recovery.”
The growth in AUM was largely market driven, due to higher global equity and fixed-income returns, with net new asset flows accounting for less of the increase.
Net new flows were a modest 1.2% of global AUM last year. Most flows went to solutions-based managers such as those offering LDI and target-date funds; into strategies other than traditional domestic large-cap equities and domestic fixed income; and into passive strategies. A quarter of traditional managers actually experienced significant outflows from their actively managed core strategies in 2012.
“The glory days of a stand-alone active manager that focuses on outperforming a benchmark are gone,” said Gary Shub, BCG partner and a co-author of the report. “They'll need to move out of core classes and into specialist categories.”
U.S. managers' profits were above their European counterparts. While U.S. managers' 2012 profits rose 10% above pre-crisis levels, European managers' profits remained 31% below what they were before the crisis.
The study noted that cost discipline among money managers continues to be an issue, particularly with managers experiencing outflows. “In order to afford investment in new capabilities, it is critical to tightly manage the cost structure,” according to the report. A thorough review of operations and information technology functions, the report says, will guide managers to “efficiency's next frontier.”
The study was based on data from more than 120 money managers in BCG's annual benchmarking study that manage a total of $33 trillion, or 53% of global AUM, as well as information from managers in 42 major global markets provided by third-party sources.