After years of superior performance, the asset management industry had to adjust to a more challenging environment in 2018, said a new report by Boston Consulting Group.
The report said market volatility, tightening monetary policy and slowing global growth led to an environment in which strong returns were suddenly difficult for money managers to achieve.
Assets under management and net inflows fell in 2018. In a sample of 30 managers from around the world representing AUM of $39 trillion, BCG found that AUM fell by 4% in 2018, vs. the 12% increase seen in 2017.
New net flows, meanwhile, were 0.9% of total assets managed, well below the record 3.1% seen in 2017 and under the historical average of about 1.5%.
The report noted that 2018 was a challenging year for asset flows. In the U.S., $620 billion of inflows were offset by $491 billion of outflows.
The top 10 U.S. players captured 81% of net mutual fund flows of firms with positive flows, compared with 85% in 2017. In Europe, the top 10 accounted for 29% of inflows in 2018, vs. 35% in 2017.
In 2018, passively managed strategies grabbed most of the net inflows in the U.S., while active strategies remained popular in Europe and the Asia-Pacific region. Of the 15 most popular strategies in the U.S., 10 were passive. Meanwhile, in Europe, only five of the top 15 strategies were passive.
BCG's report says that to remain strong in 2019, asset managers must focus on reducing costs, review their portfolios, optimize pricing and adopt aggressive tactics such as refocusing on client retention, leveraging data and analytics, and seeking M&A opportunities.