More resilient business models needed

resilienceA more resilient business model and greater transparency with regard to products, processes and communication will be key for European asset managers to improve performance post-crisis and restore investor interest in actively managed products.

A report by ratings agency Fitch Ratings showed that asset managers need to strengthen the their business models if they are to improve performance post-crisis.

To do this, Fitch said specialist managers will require more flexible cost structures, which could be achieved via outsourcing, and lower break-even points. While generalist managers will need to increase critical mass on core or growing markets, diversifying the investors' base and developing product mixes around all-weather products. Alternatively, they may deploy strong advisory capacities in order to keep assets in-house through market cycles.

With regard to clients, the report said greater transparency in all aspects of the business will be crucial to fully restore investors' commitment to actively-managed products.

The capacity to offer tailor-made as well as off-the-shelf products adapted to investors' needs, such as moderate absolute return funds, life-cycle, risk-defined or income generating products, and to educate investors objectively will also be key, said Fitch. Managers may also need to involve investors more in investment decision-making or risk management, to forge a closer relationship with them.

Aymeric Poizot, head of Fitch's Emea fund and asset manager rating group, said: "Asset managers continue to battle with more volatile capital markets, more demanding and cautious investors, increasing competitive pressures fuelled by the globalisation of the industry and the advent of substitution products.”

The ratings agency will discuss two further challenges the industry is facing - the need to adapt products and staffing to new macro trends and the need to adapt investment processes to new capital market conditions - in a forthcoming report.

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