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Alternative Market Briefing

Traditional assets continue migrating to passives, alternatives, specialties and solutions

Wednesday, July 12, 2017

Benedicte Gravrand, Opalesque Geneva:

According to the Boston Consulting Group's latest report on the global asset management industry, the decade-long migration of investments from traditional active-core assets to passives, alternatives, specialties, and solutions will persist, squeezing traditional assets and shrinking their share of revenue and AuM.

Indeed, for the first time since 2008, worldwide revenues and profits of traditional managers fell last year; margins contracted due to continued pressure on fees; and investment outflows from traditional active products persisted.

The industry's 2016 performance was the second consecutive year of weak results, the BCG report notes. Global assets under management (AuM) of traditional managers, stagnant in 2015, returned to growth in 2016 - rising 7% to $69.1tln. But the increase was largely due to asset appreciation in global financial markets. Net new flows were a tepid 1.5% of beginning-of-year AuM, little changed from recent years.

BCG sees a decoupling in AuM and revenue in the whole industry. There is, for example, a faster growth of AuM in passive products (passive mandates, funds and ETFs) although their contribution to revenue remains small; AuM grew from $6bn in 2008 to $14bn in 2016, but still represent 6% of the industry's global revenues.

On the other hand, alternatives account for only 15% of AuM but contribute 42% of total revenues (net). The next two strongest contributors to as......................

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