European assets under management grew at a slower rate in 2004 than the previous year, but managers proved adept at taming costs. Among other reasons for the downturn, a recent industry survey blames the slowed growth on managers’ failure to separate themselves from the competition.
McKinsey & Company, a management consulting firm, surveyed 110 asset managers, with total third-party assets under management of 60-65% of the European market.
“Players with no clearly differentiated strategy will be stuck in the middle, facing difficult choices,” said Andrew Doman, director of European assets management practices for McKinsey. “Those that fail to strengthen their brand — and make it mean something really distinctive to customers — risk ending up as little more than back-office product suppliers, unable to generate serious profits.”
Some of the findings of the survey are as follows:
Total European assets under management grew by 9% to €7.4 trillion in 2004, falling behind the previous year’s growth of 13%. New money inflows contributed to only one-third of the growth, institutionals stayed at 11% growth, while retail fell from 12% to 7%.
Scandinavia and the UK boasted the highest growth rates for assets under management, which was driven by strong performance and high shares of equity, the survey reported. Germany and Italy performed poorly, with low shares of equity and net inflows.
The report found that profitability rose by 9% as a result of falling costs rather than increased revenue. Germany, the UK and France maintained their positions as top contributors to the European profit pot, but Iberia and Italy were most effective in balancing costs and revenues.
“We’re very encouraged by the advances firms have made in reigning in costs,” said Martin Huber, survey principal.
Net revenues remained mostly stagnant, rising by 0.4bp, from 32.7bp in 2003 to 33.1bp in 2004. The survey attributes the unimpressive growth to stable retail and institutional pricing and product mix.