Big fall in Middle East assets under management

/by Arabian Post Staff/The global growth of asset management stalled as the industry in 2015 recorded its worst year since the 2008 financial crisis, according to a report by The Boston Consulting Group (BCG).

Growth in assets under management (AuM) stalled—or in the case of the Middle East declined 10%—and net new flows of assets, revenue growth, and revenue margins all dipped lower in 2015, according to Global Asset Management 2016: Doubling Down on Data. BCG’s fourteenth annual benchmark report on the industry.

Asset managers’ future prosperity and competitive advantage will require them to shift from outdated product strategies and develop disruptive investment capabilities using leading-edge data and analytics, the report emphasizes.

The lack of overall growth was due largely to the generally negative and turbulent performance of global financial markets, which failed to buoy the value of invested assets as in prior years. Net new asset flows remained tepid. At the same time, the rising value of the US dollar reduced values of non-US assets in dollar terms. In addition, institutional managers have divested assets to outbalance government deficits.

BCG reports that the global value of AuM rose just 1% in 2015, to $71.4 trillion from $70.5 trillion in 2014, after growing 8% that year, and at an average annualized rate of 5% from 2008 through 2014.

The industry’s regional growth, as measured by AuM, reflected in large part the performance of capital markets by region in 2015. AuM decreased in North America and the Middle East but rose elsewhere. Growth was modest in Europe and strong in Latin America and Asia, excluding Japan and Australia. The 10% growth of AuM in Asia, excluding Japan and Australia, was relatively robust, but once again, it trailed the rapid expansion of the region’s private wealth.

Net new flows of assets—the lifeblood of the industry’s growth—also varied widely by region. Flows were tepid in the U.S. but more robust in much of Europe and Asia-Pacific, where they reached almost 2.5% and 3% of 2014 AuM, respectively. This performance marked a recovery of net flows in France, the Benelux countries, and Eastern Europe and continued positive momentum in Germany, Spain, and Italy. In Asia-Pacific, China and India were among the markets where net flows exceeded 10% of prior-year AuM.

While asset management continues to be highly profitable, the 2015 results underscore the continuing dependence of many managers on rising financial markets to boost asset values rather than on long-term competitive advantage to generate strong net new flows, the report says.

Advanced and sometimes disruptive technologies—including machine learning, artificial intelligence, natural-language processing, and predictive reasoning—are on the verge of joining the mainstream asset managers, according to the report. Early-moving firms and financial-technology providers are beginning to model scenarios that push the boundaries of traditional analytics.