Net inflows across investment strategies are expected to be muted until 2024 due to the impacts of the COVID-19 pandemic.
A report by management consultant Oliver Wyman and Morgan Stanley, published Monday, forecast a drop in net inflows growth rate to between 2% and 2.5%, down from the growth rate of between 3% and 4% recorded in 2019.
Key structural trends — including downward pressure on fees and increasing longevity — will continue to negatively affect net inflows and are expected to be accelerated by the pandemic.
While the pandemic will also negatively affect money managers' revenues, the report showed that these revenues could continue to grow at 1% per year, boosted by increased allocation to actively managed strategies.
Still, Oliver Wyman and Morgan Stanley also predicted that revenue streams associated with emerging markets and private markets strategies will grow at an annualized average of 7% through 2024.
"Leading up to the crisis, we were observing an acceleration of churn, with flows from active-to-active 2.9 times the level of inflows into passive. The major difference that we expect through the recovery is that the intensity of the shift to passive will be moderate for those that can demonstrate relative outperformance," the report said.
The report also said that efficiency gains prompted by the crisis could deliver between 10% and 15% in cost savings. Money management staff working virtually could cut 60% of costs in distribution, middle and back office operations, as well as cutting 30% of costs in investment management, the report said.