GREENWICH, Conn. — U.S. asset management firms grew in both 2004 and 2003, helped by strong capital markets, expense controls and operating efficiencies, according to Greenwich Associates' 2005 Competitive Challenges study.
Operating profit growth surged to 26.5% in 2004, from 5.9% in 2003, and senior managers at asset management firms expect to increase profit margin targets over the next five years to 35% from 28%.
In 2004, revenue growth reached a 20% rate, up from 5% in 2003. Net asset flows increased to 6% from 1.2% over the same period.
The operating expense growth rate reached 16.7% in 2004 — up from 2.6% in 2003 —in line with or slightly less than most firm's revenue growth rate, according to Greenwich Associates. Compensation expense as a percentage of revenue held near historic norms around 45%.
The firm also found that asset inflows as a percentage of assets under management increased to 15% in 2004 from 11% in 2003, while outflows over that period climbed to 16% from 12%.
"The amount of separate account outflows increased at an accelerated rate as a percentage of client servicing scores that we measured decreased," Andrew Klebanow, a Greenwich consultant, said in an interview.