Independent and quoted money management firms, both traditional and alternative, will capture 33% of all assets under management by 2012, up from 24% today, and will be beneficiaries of an historic shift from the retirement mainstay upon which the global fund industry was built, according to Putnam Lovell, the division of Jefferies & Company, Inc. focused on the asset management and financial technology industries.
Commercial banks, insurance companies and investment banks controlled the global money management business in its infancy. Increasingly, they will find it more lucrative to assemble unaffiliated products and play the role of professional buyers rather than fight a losing battle for market share with independent managers.
Captive fund management operations of banks and insurers will agitate for more autonomy and spinoffs will become more common, particularly in Europe and Japan, according to the Jefferies Putnam Lovell report, “After the Belle poque, the Future of Fund Management”.
Traditional active management, long-only stock and bond portfolios charging asset-based fees, will contribute less than half of total industry revenue by 2012, down from about 69% in 2006. More than 50% of revenue will come from performance fees, alternative investments rapidly becoming mainstream, and proliferating long-short extension strategies.
“The days of relying on tax advantages and government subsidies to spur retirement savings and growth in the fund industry are over. Individual investors, Asia, and sovereign wealth funds will be major sources of new business in the next five years. Yield rather than asset accumulation will increasingly be the focus of investors, boosting demand for a new generation of products,” says Ben Phillips, managing director and head of strategic analysis, Jefferies Putnam Lovell, and author of the new report.