Transcript Slide 1
Asset Management – Industry Outlook EIJA HIETAVUO, Head of Investment Management Markets, Reuters EMEA
Agenda: Industry trends and Outlook
•
Overview of the Asset Management markets
• Biggest markets in AuM, Conventional Asset Management • Biggest markets in AuM, Hedge funds •
The Asset Management industry
• Past and future of the AM industry • Some general highlights on the AM market • What is happening now in the AM Industry • The AM industry in 2010: trends & visions • What does this mean to Asset Managers in terms of Financial Information Management?
Investment Management 2007
Overview of the Asset Management markets
Biggest markets in AuM* Conventional Asset Management**
Major Markets concentrate 79% of the AuM 55 USD trillion in 2005 EUROPE 10,992 bn USA 26,489 bn 48% UKI 4,061 7% 20% NETH.
1172 3% FR 3055 6% SWITZ 923 2% GERM 1781 3% JAPAN 6,153 bn 11%
> Major Markets concentrate 79% of the AuM growth > Global AuM were 55 USD trillion in 2005, 10% growth from 2004 and 54% from 2002 > We can estimate industry CAGR of 6% from end 2005 through 2010 if current economic trends remain > Concentration of the industry has grown in recent years. AuM of world's largest 500 fund managers increased 13% in 2004 and 22% in 2003
Source: International Financial Services, London, Fund Management, City Business, 2005 data, fund management of conventional assets (does not include alternative investments) *AuM = Assets under management **Conventional assets include pension, insurance and mutual funds
Investment Management 2007
Biggest markets in AuM Hedge funds
High Concentration on Geographical distribution of Hedge Funds AuM USD 1,500 bn in 2006 USA 66% EUROPE 24% ASIA 8%
> Hedge Fund industry AuM totalled USD 1,500bn in 2006 up a third from 2005 and twice 2003 > Number of Hedge funds raised 5% from 2005 to 2006 > While the USA remains major location for hedge fund managers, Europe has doubled his share from 2002 to 2006 and Asia grew from 5% to 8% in the same period > New York and London are the most important Hedge Fund locations > In Asia, Australia is the most important location for management of Asia-pacific Hedge funds (1/4 of AuM), followed by Japan with (1/5) and Hong Kong with 14%
Source: International Financial Services, London, Hedge funds, City Business, 2006 data
Investment Management 2007
The Asset Management industry past & future
Past and future of the AM industry
•
The Evolutionary path since the bubble burst in 2000*:
•
Retail
and
Institutional
markets have drifted apart • Industry has
professionalized
• World has extended to include
newer markets
, stimulating emergence of new breed international players
Looking forward on tomorrow’s IM world, to summarize:
• There will be growth but it will not be shared equally among players, markets or products* • The industry structure will gradually polarize, and generic asset managers will cede market share to their differentiated brethren* • Industry will open up to an even global level were
cross border
competition will result in greater concentration of players* • The
universe of investable assets
is growing, therefore giving opportunity to fund managers to better diversify and search for performance* • Intensification of the war for talent**
*Source: Will the goose keep laying golden eggs?, October 2006 – The eight annual survey on the profitability of European Asset management, McKinsey & Company **Source: 2015: the radical redesign of the asset management chessboard, McKinsey & Company, 2007
Investment Management 2007
Some highlights on AM Market
• •
Key facts on the AM industry:
•
Capital Markets
have been a strong driver of AuM Growth globally • Industry
Profitability
has improved significantly • Household financial asset allocation to the Asset Management products (funds) is expected to raise dramatically in the following years
The major opportunities for the industry are derived from:
• The need from
retail
investors to have new asset management products (funds) to fit their investment needs • The
demographic
pressures and the state pension insufficiency to cover cost of living that requires retirement private savings done via asset management products (pension and other funds) • The stunning
emerging
market wealth growth in some countries (specially India, China, Gulf States, Brazil and CEE)
*Source: Setting Your Sights on a New Horizon, Roberts & Taglioni, January 2006, McKinsey & Company
Investment Management 2007
What is happening now in the AM Industry
• •
The Global Fund Manager Survey by Merrill Lynch in October 2007
• Fear of
Slowdown
Crisis in Global and European
growth
as a result of the Credit • The Asset “Allocators”: • Continue to increase their preference for
equities
• Prefer
sovereign
bonds over corporate bonds • Choose
large
• Adopt
growth
caps over small caps over value strategies over bonds • Choose the
technology, materials and industrials
over the rest • Investors have been increasing exposure to emerging markets
JP Morgan 2007 Alternative Asset Survey (Nov 2007)
• Desire to diversify drives big push into alternative assets – more than EUR 1000 bn investment in next 2-4 years • From Private Equity, Real estate– to Second wave Alternatives like Infrastructure Assets, Commodities and Shipping, Timber and Clean Energy
*Source: The Global Fund Manager Survey, Merrill Lynch,, Investment Strategy, July 2007
Investment Management 2007
The AM industry in 2010 : Key trends
•
Key trends that will increasingly shape the sources of industry growth and profitability over the next few years:
• Move from
accumulation
to
income
and
risk
management • Move from
relative
performance to
outcome
orientation • • Separation of
Alpha and Beta Pension
restructuring • Institutionalization of retail sales • Increasing role of
marketing and client service
• Convergence and evolution of
alternative
investments • Growing
internationalization
and diversification of assets
*Source: The Asset Management Industry in 2010, Bigger, sometimes better – and the best pulling away, McKinsey & Company 2006
Investment Management 2007
The AM industry in 2010 (II): Major characteristics
• •
The trends mentioned in previous slide will influence structure and dynamics of the asset management industry By 2010 leading players will look very different than they do today in terms of size, capabilities and products. 5 major differences will characterize the industry and its leaders
• Driving scale to generate a winning edge:
scale
,
multi-boutique
and
focused
asset players • Different earnings profile for traditional asset managers:
new products
• A shakeout – of sorts – in the
alternative investment
industry: more focused business models , transparency and players’ concentration • A more
crowded
and complicated industry landscape.
• A measured pace for
mergers and acquisitions
that will depend on the Asset Manager profile and size, dominant model will be multi-boutique
*Source: The Asset Management Industry in 2010, Bigger, sometimes better – and the best pulling away, McKinsey and Company 2006
Investment Management 2007
Europe: What is Happening here?
Domestic niches under threat
– focus on
cross-border
sales • UCITS III • 70% of European funds are UCITS, pa growth 20%
Demand for new distribution channels
• Retail banks vs. IFAs and insurance companies
Product development hot topic in 2008
• Extended powers with UCITS III • Focus on alternative assets, LDI and complex investment strategies
Hedge Funds
• From institutional to
Retail Regulation
• MiFid, KYC/AML, UCITSIII
Pensions
•
LDI
driving shift from equities to bonds and other asset classes • Cash flow matching approach to investment – using bonds to create a porfolio which matches the expected liability ouflows
Socially and Environmentally Responsible Investment, Islamic Finance
Investment Management
What does all this mean to AM: Technology
• • • • • • • • • •
Architecture and Integration: improve infrastructure to support top-line revenue growth Order Management and execution management systems Reference Data Management Derivatives Processing Legacy replacement/Extension Post-trade automation/workflow Portfolio Analytics Business continuity Broker Management technologies CRM systems
Investment Management 2007
What does all this mean to AM: Compliance
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Tactical Compliance
•
Compliance with AML/KYC Know your Customer & CRM
•
Operational Risk Management
•
Compliance with UCITS III
•
Value at Risk
•
Client reporting
•
Compliance with MiFiD
•
Trade reporting
Investment Management 2007
What does this mean to AM: Information Requirements?
Buy Side Intermediation Retail Investors & High Net Worth Individuals Pension Funds Plan Sponsors, Trustees State Funds Corporate Asset Allocation Decision Private Assets Asset Managers Lipper Funds Fundamental Economic data Corax Real Time ICW Estimates/Starmine Global Filings Investment Management 2007 Hedge Funds Fundamentals News Feeds Tick Data Estimates Economics M&A Low Latency Private Equity Private Company M&A Multiples IPO & Deals Credit Institutional Holdings Economic data Fundas/Estimates People Alternative Commodity Pricing Real time Derivatives Real Estate Ecowin