Assets under management for Europe's money managers hit new highs in 2017, growing 8% to €22.5 trillion ($27 trillion), but managers must adapt to three key long-term trends, research by McKinsey & Co. shows.
The management consultancy said in its report, "The state of the European asset management industry," that most of the increase in AUM was driven by rising prices in financial markets, rather than net inflows. The report said net new client inflows were €581 billion, up 3% vs. figures for 2016. The U.K. and Germany accounted for the highest proportion of net new flows. Figures were not immediately available.
Revenues also reflected higher assets under management, growing 56% over the decade ended Dec. 31, 2017 to €156 billion. Over the year, total revenues grew 11.4%.
McKinsey said the industry faces three important, long-term trends:
- A continuing shift from active to passive or to alternative asset classes.
- Changing expectations of clients, which will require a "re-engineering of investment distribution and the investing experience."
- The impact of data and advanced analytics.
The consultant said managers have many tactical options to meet these forces and to "add significantly to the bottom line."
Among the changes managers can make, according to the report, are an expansion of digital modes of delivery, strengthen branding and broaden strategies options via "go-to-market" models, with personalized offerings and advice. Managers can invest in "innovative investment processes that take advantage of new data set and analytical techniques," and can also work to broaden investment teams. Another suggestion was to gain a greater understanding of cost drivers and "break the traditional link between growth in (assets under management) and costs."
Spokesmen for McKinsey could not immediately be reached for comment.