Asset Managers Need to Set a Strategy to Leverage the AI Opportunity and Drive Future Growth – BCG
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BOSTON—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:
“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.
Boston Consulting Group is an Equal Opportunity Employer. All qualified applicants will receive consideration for employment without regard to race, color, age, religion, sex, sexual orientation, gender identity / expression, national origin, protected veteran status, or any other characteristic protected under federal, state or local law, where applicable, and those with criminal histories will be considered in a manner consistent with applicable state and local laws.
Pursuant to Transparency in Coverage final rules (85 FR 72158) set forth in the United States by The Departments of the Treasury, Labor, and Health and Human Services click here to access required Machine Readable Files or here to access the Federal No Surprises Bill Act Disclosure.
This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
Our aerospace and defense experts help industry players navigate their day-to-day operations and identify ways they can innovate for the future.
Breakthroughs in automotive technologies and emerging business models are changing the world. We help the leading game changers stay ahead of the curve.
Brands around the world must master digital to survive. We have the expertise and capabilities to power consumer-centric innovation grounded in data, analytics, and AI.
We partner with effective organizations and educators to improve student outcomes and learning models—from K-12 through higher education—locally, nationally, and globally.
BCG’s energy consultants work with business leaders, governments, and ecosystems to create energy solutions for a net-zero pathway and beyond – that are practical, equitable, and just.
BCG helps global and regional financial institutions build for the future using digital innovations and an ESG focus to drive fundamental change and deliver on evolving customer demands.
We work with organizations around the globe to transform health care operating models enabling them to deliver medical breakthroughs, innovative cures, and transformative patient experiences.
Our experts provide industrial goods clients with the skills they need to adapt to change and rethink their business models in their rapidly evolving industries.
Customers increasingly expect more from insurers. BCG helps companies rise to the challenge and equips them to lead in the digital future.
The rapid growth of private capital brings unprecedented opportunities to unlock value while making a positive difference in the world. BCG advises leading investors on how to stay ahead.
BCG’s Public Sector practice joins forces with global organizations and governments to transform how they operate so they can better meet increasingly challenging and complex societal problems.
We help the world's leading retailers compete in the digital era by developing and delivering cutting-edge tech strategies and identifying new sources of growth.
BCG collaborates with technology, media, and telecommunications companies to solve problems and pursue new strategies as they continue to shape the future.
We empower clients to boldly reinvent themselves and embrace digital innovation so they can better serve their customers amid today's volatility.
The industry has suffered an unprecedented shock. BCG collaborates with travel and tourism providers as they navigate this turbulence and build resilience for the future.
See how we help our clients expand their capabilities on multiple existing—and emerging—fronts.
Scaling artificial intelligence can create a massive competitive advantage. Learn how our AI-driven initiatives have helped clients extract value.
Excavating purpose is among the rewarding journeys companies can take. BCG BrightHouse helps organizations embrace purpose to achieve higher returns, employee engagement, and customer satisfaction.
Leaders face an uncertain landscape. The impact of each decision feels impossible to predict, which is why they need strategies that are proactive, resilient, and competitive. No matter their starting point, BCG can help.
Even today's leading companies could benefit from an always-on transformation capability—the kind that engenders resilience and leads to long-term value creation. BCG knows what it takes to build this muscle.
The time for global climate action is now. BCG helps clients accelerate their climate and sustainability journey and seize new opportunities to build competitive advantage.
The rules of business and for maintaining competitive advantage are changing. We help companies reimagine strategy and value creation in a fast-paced world.
BCG’s cost advantage approach resets costs within a framework that is customized, precise, and thorough.
Having rich customer insights allows companies to solve pressing business problems and capture growth opportunities. BCG’s Center for Customer Insight arms companies with the tools they need to unlock this advantage.
BCG identifies and delivers high-impact programs to build companies of the future that will outperform the competition in the future.
Our work enables clients to build teams that fully reflect the diversity in the world and the communities they serve—and empowers them to advance their businesses and our society.
Innovation is extremely difficult—but also necessary. We collaborate closely with organizations on holistic innovation journeys to help them secure long-term competitive advantage.
We stand side by side with our clients, offering expertise and strategy as they look to expand the boundaries of their businesses in an uncertain and sometimes tumultuous world.
We ask three guiding questions: when, where, and how will you manufacture in an era of emerging technologies and economic uncertainty? We're committed to helping our clients arrive at answers that are right for them.
Customer centricity is key and made possible through analytics, agile processes, and a test-and-learn culture. BCG partners with marketing and sales organizations to make it happen.
BCG provides the strategic decision-making capabilities and proactive portfolio management companies need to create value from M&A, transactions, and PMI.
We help clients unlock value from every aspect of their operations, maximizing efficiency and effectiveness in procurement, service operations, supply chains, and beyond.
Organization is at the core of nearly everything we do at BCG. We believe that when clients have the right organization design, the possibilities are endless.
Any company's most important asset is its people. Our experts in leadership, culture, talent, reskilling, and HR help businesses respond to current and future challenges.
We bring expertise and data-driven strategies to help clients unleash the power of effective pricing—and unlock its potential to increase the bottom line.
BCG's Risk and Compliance consulting supports their client's growth ambition with strategic, transformational, and technical functional offerings in Finance.
By focusing on tangible ways to generate positive social impact (related to climate change, global education, racial equity, and more) we help organizations tackle some of the most pressing issues facing our world today.
Zero-based budgeting is a powerful strategy that yields significant benefits. Our approach fosters a culture of cost consciousness, growth, and innovation.
BCG X disrupts the present and creates the future by building new products, services, and businesses in partnership with the world’s largest organizations.
Explore a cross-section of the latest insights and perspectives from BCG experts.
A forward-thinking CEO agenda has never been more crucial. Our insights give you greater clarity on what lies ahead, helping you lead with confidence.
At the BCG Henderson Institute (BHI), we believe that leadership starts in the mind and that ideas precede action. We bring the ideas and inspiration that will help forward-looking leaders shape their next game.
Subscribe to our newsletters and e-alerts to stay connected with the latest insights, data, ideas, and perspectives from BCG.
Access BCG’s alumni network for former and current BCGers.
As a top consulting firm, BCG helps clients with total transformation—driving complex change, enabling organizations to grow, and driving bottom-line impact.
Meet BCG’s executive, functional, and regional leadership teams.
Find BCG offices around the world.
Visit our media center for resources, press releases, trending topics, contacts, and more.
When you start with Beyond there’s no limit to how far we can advance the world.
BOSTON—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:
“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.
Boston Consulting Group is an Equal Opportunity Employer. All qualified applicants will receive consideration for employment without regard to race, color, age, religion, sex, sexual orientation, gender identity / expression, national origin, protected veteran status, or any other characteristic protected under federal, state or local law, where applicable, and those with criminal histories will be considered in a manner consistent with applicable state and local laws.
Pursuant to Transparency in Coverage final rules (85 FR 72158) set forth in the United States by The Departments of the Treasury, Labor, and Health and Human Services click here to access required Machine Readable Files or here to access the Federal No Surprises Bill Act Disclosure.
This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
