Last year marked an increased sense of uncertainty in the asset management industry in terms of flows, revenues and margin, according to a new report from Boston Consulting Group.
After 2017 became the best year on record in terms of asset flows, 2018 was the first time since the financial crisis that assets under management and flows had dropped significantly.
"It was not a great year," said Renaud Fages, a managing director and partner at Boston Consulting Group and author of the report, in a phone interview.
According to the firm's annual report on the asset management industry, the value of assets fell by 4% globally in 2018, to $74.3 trillion from $77.3 trillion. Net inflows amounted to $944 billion in 2018, well below 2017's $2.15 trillion in new net inflows.
Mr. Fages added that as a result, managers are now a lot more cautious as they look to manage costs.
The report also noted the continued "winner-take-all" trend of the bulk of positive flows going to the 10 largest firms.
Technology also continues to be more critical, while fees continue to put pressure on margins.
"As we look toward the 2020s, we expect to encounter more market volatility, competition and economic uncertainty," the report said. "But we also see opportunities as the asset management industry evolves and as technology moves to center stage."
The report predicts that in the next few years active management will have to continue to make its case against passive investing and alternative assets.
"We expect most firms to step up their digitization activities, leading to reimagined business models, new technology capabilities, greatly increased efficiency and transformed client relationships," the report said.
China is also expected to be the second-largest region for asset management, ahead of continental Europe, attracting more flows than the U.S. over the next decade.
Also, emerging markets will become more important, and sustainable investing will rise as managers incorporate environmental, social and governance factors into their investment decisions, BCG said. Asset managers can make significant progress in sustainability investing by taking such steps as developing proprietary data tools and making the hiring of people who understand sustainability issues a priority, the report added.
