2017 was a banner year for asset management but in 2018 assets dropped by $3 trillion. Does that mean trouble is ahead?

A recent report from Boston Consulting Group says the drop is actually a reversion to the mean rather than a sign of impending doom. The first half of 2019 has been strong, but BCG reports that the 2018 drop may have left managers a bit more cautious.

Renaud Fages, BCG, sat down for an interview with Institutional Investor.  He said that managers are facing more challenges than ever and things they’ve done in the past won’t likely work going forward thanks to:

 

  1. Constant fee pressure
  2. Flows to passive strategies and private assets
  3. Technological advances and the widening gap of those that can keep up and those that can’t

 

Moving forward, BCG sees two possible business models succeeding:

  • Boutique alpha shops that can deliver “consistent, superior performance”
  • “Distribution powerhouses” - those that are able to deliver on a larger scale with over $1 trillion in assets

 

What does this mean for small managers?

BCG believes small managers will find themselves squeezed by the bigger, giant firms stating they might not have the same scale to invest as the larger firms and there will likely be more mergers and acquisitions in the future. You can read the full synopsis here.

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