Despite 20% growth in worldwide investment industry assets to $71.8 trillion over the four years ended Dec. 31, aggregate industry revenue rose just 8% over the period.
Over the one-year period ended Dec. 31, worldwide asset growth was 5.1% while revenue was up 3%, showed an analysis from money manager consultant Casey Quirk, a business of Deloitte Consulting, and compensation specialist McLagan, a unit of Aon.
The joint research team attributed part of the slowdown in revenue growth to declining fees, noting that there was 12-basis-point decline in median total manager fees to 42 basis points over the four-year period, according to a joint news release.
Rising costs, especially from non-compensation expenses, including technology, regulatory, back-office processing and office space, also took its toll on manager profitability. The median operating margin dropped to 32% in the year ended Dec. 31. The median operating margin also was 32% in the year ended Dec. 31, 2015.
The Casey Quirk-McLagan team analysis found that the ongoing operational expense for running an asset management company with $150 billion in assets under management rose to $23 million in the year ended Dec. 31, up from $5 million in the 12 months ended Dec. 31, 2014.
"It's now a necessity, not a luxury for asset managers to reduce expenses by automating, streamlining data and technology, and shifting functions to lower cost locations," said Amanda Walters, a senior manager at Casey Quirk, in the news release.
Implementing cost-savings practices could lead to a reduction in ongoing fixed and variable expenses of between 6.5% and 17% for individual managers, resulting in a minimum industrywide savings of $13 billion, the Casey Quirk-McLagan analysis showed.
