The European money management industry will experience less growth in 2016, assuming lower market returns and net inflows, but money managers who are flexible with their operational models and technological changes will be better positioned to succeed in a difficult environment, Fitch Ratings said in a report.
The European money management industry grew by 10% in 2015, according to the report, to more than €20 trillion ($22.7 trillion) in assets under management, a record high, but AUM is expected to decline slightly in 2016, based on first-quarter numbers.
Many aggregate European mutual fund types reported inflows in 2015, the report said. The most successful were multiasset funds, which drove about 50% of inflows, while flows into fixed income slowed down, and emerging markets and U.S. high-yield bond funds saw outflows.
“As an industry that has historically been slow and reluctant to change, asset managers show varying degrees of willingness and ability to adapt but the status quo is no longer an option as institutional investors' standards continue to rise,” Fitch Ratings said in the report.
Many of those asset classes experienced outflows in the first quarter of 2016, with bonds losing more than €12 billion, money market funds losing between €6 billion and €8 billion, and equity funds losing more than €2 billion in outflows. Investors overall raised allocations to alternatives.
The report said European money managers are “under intensifying scrutiny from regulators and investors” and that active money managers are “under pressure to justify in a transparent manner their returns relative to fees charged given lower market returns and the continued shift to low-cost passive investments.”
The report also said money managers who use more efficient operating models and use data and technology for their “potential for providing new sources of alpha generation and asset raising” will have the advantage in a challenging environment.