The lingering effects of the COVID-19 pandemic likely to extend well into the new year combined with slower asset growth, continued pricing pressure and the urgent need for technology upgrades are creating a challenging environment for money managers.
"All of the macro issues affecting the global investment management industry fall into one bucket — maturation," said Kevin P. Quirk, principal, of Stamford, Conn.-based Casey Quirk, a practice of Deloitte Consulting LLP.
"The money management industry is experiencing classic maturation problems including slower organic growth that is mostly flat when capital market gains are excluded, fee pressure in most investment strategies, and an urgent need for technological advances for their businesses," Mr. Quirk said.
One of the biggest issues facing the industry is an oversupply of money management firms, Mr. Quirk said, noting that his firm believes "the business is massively oversupplied. An uptick in mergers and acquisitions will remove some of that oversupply," he said.
An exacerbating factor for money managers this year is asset owners' newly heightened impatience with problematic investment strategies, said Christopher M. Redmond, global head of manager research, Willis Towers Watson PLC, London.
"The time frame for patience with managers has gotten very short, especially for corporate defined benefit plans approaching buyouts. Tolerance for manager underperformance is very low," he said, adding that manager changes are on the rise.