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Asset Managers With $74 Trillion on Brink of Historic Shakeout

Readers may find this Bloomberg analysis of the asset management industry interesting. It is full of lots of data and interesting charts. It highlights the move towards passive and the high costs of active funds. see https://www.bloomberg.com/graphics/2019-asset-management-in-decline/

Asset Managers With $74 Trillion on Brink of Historic Shakeout

The industry that gave rise to investing titans Peter Lynch, Bill Miller and Bill Gross is facing an existential crisis.

For years, mom-and-pop investors frustrated by high fees and subpar returns from big-name money managers have been shifting their savings into ultra-cheap funds that simply mimic the returns generated by benchmark stock and bond indexes. Passive investing, as it is known, was in. Active was out.

At first, few noticed the trickle of money out of funds run by star money managers into cheaper index products. But now, no one can ignore the flood. The exodus from active funds has sent fees inexorably lower, led to the loss of thousands of jobs and forced large-scale consolidation among firms. That’s pushing the industry, with $74 trillion in assets as measured by Boston Consulting Group, towards a shakeout where only the strongest will survive.

“We’re clearly at a watershed moment,”

The article is mainly US focussed with some comment about Europe. However it does note: “It’s not just investors taking note of whether money managers are worth what they’re charging: the U.K.’s Financial Conduct Authority said it will look closely at underperforming active funds in its next annual report to shed light on whether they’re giving value to investors.

Cliff Weight

 

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