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Laxman Pai, Opalesque Asia:

The global asset management industry showed some signs of recovery in 2023, with total assets under management rising 12% year-over-year to nearly $120 trillion, revealed a study.

According to research by Boston Consulting Group, the industry's revenues increased just 0.2% in 2023, while costs rose 4.3% for the year. Overall, profits declined 8.1%.

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. U.K. AUM grew 2% in 2023, and it remains the largest market in Europe.

The study said that five fundamental pressures pose structural challenges for asset managers and show no sign of subsiding.

1. 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.

2. 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.

3. Fee compression is ......................

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