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Alternative Market Briefing

"Negative" outlook for global asset management, says Moody's

Wednesday, December 02, 2020

Laxman Pai, Opalesque Asia:

A wavering investor appetite for risk and a deteriorating competitive environment is leading to a negative outlook for the global asset management industry next year.

Rating agency Moody's Investors Service said in its annual outlook report that, on top of these issues, longer-term trends that were already pressuring the money management industry "may have intensified with the coronavirus crisis."

"Among the challenges, a deteriorating operating environment, changing investor preferences and a highly competitive backdrop in which scale, diversity, and access to distribution has become a necessity," Moody's explained.

"The industry is ripe for consolidation as it is fragmented with top 10 firms having 35% of global market share and oversupply of mutual funds in benchmarked disciplines," Moody's Assistant Vice President Rokhaya Cisse said.

Challenges include that active management remains out of favor with investors and that fee pressures are accelerating in commodity-type products.

"Traditional active management remains out of favor with investors and fee pressures have been accelerating in commodity-type products. Especially in the US, larger banks and insurance companies will be formidable bidders for asset managers that can increase their own competitive edge," Rokhaya added.

In the next few years, areas which will attract asset flows include alternatives, ESG, and outcome-oriented products and services, s......................

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