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Alternative Market Briefing

Money managers hit by ever-rising costs as fees drop: Casey Quirk

Wednesday, June 26, 2019

Laxman Pai, Opalesque Asia:

Rising costs, especially from non-compensation expenses, including technology, regulatory, back-office processing and office space, took its toll on manager profitability.

Noncompensation-related expenses at asset managers have been rising steadily over the past five years and are now approaching one-third of total expense at many firms, adding to the economic stresses the industry confronts, said a report from Casey Quirk.

While overall industry assets under management climbed to $71.8 trillion in 2018 from $68.3 trillion in 2017, aggregate fees have declined nearly 20% in the past four to five years, said the asset management strategy consultant Casey Quirk, a Deloitte business, and McLagan, a unit of Aon.

Overall expense growth has matched or outpaced revenue growth over the same period, according to the annual "Performance Intelligence" analysis. As a result, operating margins fell to 32% in 2018 from 34% in the previous year.

Casey Quirk and McLagan found that noncompensation costs - including regulatory, back office processing, technology and office space - rose above 30% from 26% in 2014. As a result, for a firm with approximately $150 billion in assets under management, for example, the ongoing operational expense of conducting normal business rose $18 million to $23 million during that period, according to the analysis.

Assets manager costs are rising globally

Compensation expense is also on......................

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