- In 2023, Assets Under Management Rose by 12% to Nearly
$120 Trillion, but Profits Fell by
8.1%
- 72% of Asset Managers Think That Generative AI Will Have
Significant or Transformative Impact, but Only 16% Have Fully
Defined a Strategy
BOSTON, May 6, 2024
/PRNewswire/ -- The global asset management industry bounced back
in 2023. The industry's total assets under management (AuM) rose to
nearly $120 trillion, an increase of
12% over 2022, a year that saw AuM plummet by 9%.
All parts of the world participated in the 2023 recovery. AuM
growth ranged from 16% in North
America to 5% in Asia-Pacific markets, excluding Japan and Australia. However, this impressive growth
only serves to mask the industry's underlying vulnerability.
The asset management industry's revenues increased by just 0.2%
in 2023, while costs rose by 4.3% for the year. With these two
opposing forces at play, profits declined by 8.1%. This is
according to Boston Consulting Group's 22nd edition of the Global
Asset Management Report, AI and the Next Wave of
Transformation, released today.
"The structural challenges facing the industry will only
continue to grow," says Dean
Frankle, a managing director and partner at BCG, and
coauthor of the report. "To remain competitive, asset managers will
need to seize the opportunities offered by artificial intelligence
and double down on investing in enhanced productivity, product
personalization, and the opportunity of private markets."
An Industry Under Pressure
Five fundamental pressures pose structural challenges for asset
managers and show no sign of subsiding.
Revenue pressure continues. Asset managers cannot rely on
market performance to drive revenue growth in the future to the
same extent that they have in the past. Since 2005, almost 90% of
the industry's revenue growth has come from market
appreciation.
Passive funds are increasingly popular. Passive products
continue to capture the lion's share of net flows. In 2023, passive
products attracted 70% of total global mutual fund and
exchange-traded fund net flows (about $920
billion). That was a sharp rise compared with the period
from 2019 through 2022, when 57% of net flows went into passive
products.
Fee compression is accelerating. Similarly, the
pressure on fees showed no signs of reversing in 2023. The average
fee in 2023 was 22 basis points (bps), down from 25 bps in 2015 and
26 bps in 2010.
Costs are rising. Costs continued on an
upward trajectory. In fact, costs have increased by about 80% since
2010 at a compound annual growth rate of 5%.
Fewer new products are surviving despite attempts at
innovation. Despite asset managers' continuing efforts to
develop new offerings, many have not been successful. In fact, only
37% of all mutual funds launched in 2013 still existed by 2023.
A Well-Executed AI Strategy Can Drive Growth
To assess where asset managers are on their AI journey, BCG, in
partnership with the Investment Company Institute (ICI) and the CFA
Institute, conducted a global survey of asset managers in the first
quarter of 2024 that focused on the elements of generative AI
(GenAI) adoption. Our benchmark includes 57 asset managers
representing more than $15 trillion
in AuM.
Among the key findings:
- 72% think that GenAI will have a significant or transformative
impact on their organization within the next three to five
years
- 66% have made GenAI a strategic priority for their
business
- 75% are actively dedicating capital and human resources for
GenAI deployment in the short term, with 29% committing a
significant portion of their innovation budget
- Only 16% have fully defined a strategy and are working on
implementing it throughout the business
"Generative AI opens up tremendous potential for innovation
within the asset management industry," says Peter Czerepak, a managing director and senior
partner at BCG, and coauthor of the report. "Achieving results will
require strategic thinking and the ability to execute at scale.
With traditional sources of growth slowing down, it's imperative
for firms to move forward on this journey."
Download the publication
here: https://www.bcg.com/publications/2024/ai-next-wave-of-transformation
Media Contact:
Eric
Gregoire
+1 617 850 3783
gregoire.eric@bcg.com
About Boston Consulting Group
Boston Consulting Group
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was the pioneer in business strategy when it was founded in 1963.
Today, we work closely with clients to embrace a transformational
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to make the world a better place.
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SOURCE Boston Consulting Group (BCG)