Global assets under management increased over 10% in 2014 to $67 trillion, according to the 2015 Performance Intelligence asset management benchmarking survey from Casey Quirk, a management consultant for investment management firms.
By comparison, industry revenue only rose 6.3% to $319 billion. Aggregate average fees fell to 48 basis points, according to the survey.
The increase in AUM is driven mostly by market appreciation, the survey found. Net flows contributed just 2.6% to the overall growth, and largely in the retail market. The report found the institutional market is “stagnant” and redemptions outpaced gross sales last year.
Casey Quirk surveyed 110 firms in North America, Europe and the Asia Pacific region.
The survey noted that while profit margins are the highest they’ve been in five years at 34%, investors moving toward passive strategies and distributors taking revenue share from managers is putting more pressure on fees. In the U.S., the share of passive investments increased to 26% from 15% seven years prior. Furthermore, passive strategies accounted for 93% of total net new flows for U.S.-registered products, according to the survey.
“Traditional active, benchmark-oriented investment managers are increasingly challenged,’’ Jeffrey Levi, partner at Casey Quirk, said in a statement.
He said that winning firms will be those that “can become product innovators, developing benchmark-agnostic, high-conviction, new active strategies,” and those that focus on providing solutions or cost-effective beta for their clients.
They must also be “able to penetrate and grow share in the retail marketplace,” he said.
The report identified four areas where asset management firms are excelling:
- Focused new active: Firms with a benchmark-agnostic investment approach, high-conviction investment styles and that are product innovators are outperforming.
- Scale beta: These firms are market leaders in passive strategies and emerging smart beta providers.
- Global broad capability: Firms that offer a wide range of investment strategies, and that have strong worldwide brand recognition and a global distribution footprint are better positioned than other firms.
- Channel leaders: Firms that are focused on specific market segments and have a strong local brand.
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