The growth rate of assets under management (AUM) in the investment management industry is likely to slow to around 4%-5% a year over the next five years globally, consultants say.
EY says current AUM growth has been fuelled by accelerating equity markets – but with the impact of shorter-term market cycles removed over the long term, AUM growth is likely to be reduced.
The lower growth will be driven by growth in global GDP and expanding middle classes channelling money into investments, but this will be tempered by headwinds such as defined benefit drawdown and the effect of large asset owners keeping more of their investment management in house.
EY predicts that AUM growth will slightly exceed the global inflation rate of 2%, and it will spur asset managers to invest heavily in next generation technology to support their business strategies of creating either global, low-cost index and smart beta products that have large scale, or niche alpha-generating products.
The report – called ‘A view on the new asset management global operating model’ - said low AUM growth, together with fee compression, will see continuing pressure to sell lower-cost products and provide clients with complete fee.
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