The global Asset Management sector recovered in 2023. Total assets managed by the sector amounted to almost US$120 billion, an increase of 12% compared to 2022, the year in which managed assets plummeted by 9%.
The recovery was in all regions of the world last year. Assets under management (AUM) growth ranged from 16% in North America to 5% in Asia-Pacific markets excluding Japan and Australia.
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In the case of Latin America, the asset management market saw 13% growth. Brazil continues to be the largest market (more than 50% of total assets managed in Latin America) and it was the engine of growth, however all the countries in the region acted as positive catalysts for the development of Latin America.
“During 2023, the Colombian market reflected a 21% growth in assets under management, exceeding the average average that exists in Latin America. In Colombia, institutional clients continue to be a dominant segment, representing 95% of assets,” said Juliana Sguerra, Managing Director & Partner of BCG.
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“On the other hand, The insurance sector in Colombia continues to be the second largest in terms of client presence and the pension sector, for its part, represents 72% of the assets under management in the country”Sguerra concluded.
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However, this impressive growth in global asset management only serves to mask the underlying vulnerability of the sector.
Asset management industry revenue rose just 0.2% in 2023, while costs grew 4.3% on the year. With these two opposing forces at play, profits declined 8.1%. This is according to the 22nd edition of the world report ‘Global Asset Management Report, AI and the Next Wave of Transformation’, published by Boston Consulting Group.
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Five fundamental pressures pose structural challenges to asset managers and show no signs of abating.
The pressure on income continues. Asset managers cannot rely on market performance to drive future revenue growth to the same extent as they have in the past. Since 2005, nearly 90% of the industry’s revenue growth has come from market value appreciation.
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Passive funds are becoming more popular. Passive products continue to account for the majority of net flows. By 2023, passive products will attract 70% of total global net mutual fund and exchange-traded fund (ETF) flows (about $920 billion). That was a sharp increase compared to the period from 2019 to 2022, when 57% of net flows went to passive products.
Rate 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 bp in 2010.
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Costs increase. Costs are on an upward trajectory. In fact, costs have increased about 80% since 2010, at a compound annual growth rate of 5%.
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Despite attempts at innovation, fewer and fewer new products survive. Continued efforts by asset managers to develop new offerings have been unsuccessful in many cases. In fact, only 37% of all investment funds launched in 2013 were still in existence in 2023.
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