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1、Global Asset Management 202321st Edition The Tide Has Turned May 2023 By Chris McIntyre,Sultan Alsubaihin,Simon Bartletta,Philip Bianchi,Joe Carrubba,Peter Czerepak,Dean Frankle,Lubasha Heredia,Bingbing Liu,Gleb Margolin,Michele Millosevich,Miftah Mizan,Edoardo Palmisani,Ian Pancham,Neil Pardasani,K

2、edra Newsom Reeves,George Rudolph,Blaine Slack,Brian Teixeira,and Andrea Walbaum1 THE TIDE HAS TURNEDIntroductionThe asset management industry has reached a turning point that will require rethinking the way it operates.For much of the past two decades,accommodative central bank policies drove up eq

3、uity markets.That rise,in turn,gave asset managers a major boost;in fact,market performance has been responsible for 90%of the revenue growth since 2006.However,we are now facing an era of higher interest rates and market uncertainties.The tide has turned,with major implications for the business mod

4、el that has served the global asset management industry so well in the past.In 2022,interest rates rose faster than expected,causing both stock and bond values to plummet.The result was the second-largest single-year decrease in global assets under management(AuM)since 2005.Global AuM fell by$10 tri

5、llion,or 10%,to$98 trillionnear 2020 levels.The net flow rate also fell below 3%for the first time since 2018,reaching 1.6%of total AuM at the beginning of 2022,or$1.7 trillion.(See Exhibit 1.)With the collapse of a built-in bull market to support revenue growth,preexisting pressures on the asset ma

6、nagement business have been exacerbated and will continue to put a dent in profitability.But there are new ways to approach profitability.In addition,new technologies are making it possible to expand into high-growth private markets and highly personalized products and services.As we see it,by embra

7、cing these three Ps,asset managers can meet investors demands and have excellent prospects for growth in the chaotic economic climate that lies ahead.The most forward-thinking industry leaders now recognize that they will have to change course in order to thrive.Make no mistake,the changes will need

8、 to be nothing short of transformational if asset managers are to continue enjoying the growth and profitability of years past.Exhibit 1-In 2022,Global AuM Fell to 2020s Level,and the Net Flow Rate Was the Lowest Since 2018Sources:BCGs Global Asset Management Market Sizing,2023;BCGs Global Asset Man

9、agement Benchmarking Database,2023.Note:Market sizing was performed on assets sourced from each region and professionally managed in exchange for management fees.(See Appendix 2.)The market sizing included the captive AuM of insurance groups and pension funds that were delegated to asset management

10、entities in exchange for fees paid.Globally,44 markets were assessed(including offshore AuM,which was not covered in any region).For all countries where the currency is not the US dollar,the end-of-year 2022 exchange rate was applied to all years to synchronize current and historic data.Values diffe

11、r from those in prior studies because of exchange rate fluctuations,a revised methodology,and changes in source data.Net flow analysis used a benchmarking study of 74 leading asset managers that represented$62 trillion in AuM,or about 63%of global AuM.200520102015201620172018201920202021202236.4Glob

12、al AuM($trillions)Net flow as a share of beginning-of-year AuM(%)46.6+5%+8%10%65.269.977.576.387.596.3108.698.32015200520092010201420162017201820192020202120221.52.90.91.53.11.23.43.14.41.6BOSTON CONSULTING GROUP 2In looking at the external and internal forces shaping the industry,we find that asset

13、 managers face five funda-mental pressures that,when taken together,present a clear case for transformation.(See Exhibit 2.)Nearly every part of the value chain is under stress.Pressure OneGrowth Is No Longer Guaranteed Since Market Performance Has Been the Main Driver of Revenues Global equity retu

14、rns from 2012 through 2021 were in the top decile of most rolling ten-year periods since 1987,according to MSCI World Index data.The net result was a built-in floor for asset managers revenue growth.In fact,90%of revenue growth came from market performance since 2006more than enough to offset higher

15、 costs,pressure on fees,and strong capital inflows into low-fee products.While 2022 was among the worst years for investor returns since 2008,markets are expected to recover.However,central banks are no longer engineering sustained market appreciation.In fact,their goals for the short term are the e

16、xact opposite;they are trying to slow growth to combat inflation.Even if central banks succeed in their mandate and interest rates stabilize,it is unlikely that well continue to see massive,coordinated stimulation efforts,barring an unforeseen shock.As a result,revenue growth from market appreciatio

17、n is likely to be significantly less,perhaps as little as half that of the past decade.The Case for Transformation3 THE TIDE HAS TURNEDPressure TwoPassive Funds Are Increasingly Popular In the US,passively managed investment products were the primary beneficiaries of market appreciation from 2010 th

18、rough 2022.The share of net flows into passive exchange-traded funds(ETFs)and other passive products reached 90%,which was roughly triple the net flows from 2000 through 2009.In 2022,the same dynamic played out.Passive funds continued to be winners,with a net inflow of$0.5 trillion,while actively ma

19、naged funds experienced a net outflow of$1.0 trillion.We can expect increased market volatility to create more investor demand for expertise in outperforming the bench-marks,yet we do not anticipate a sea change in which significant capital flows back into active funds in the US.The passive value pr

20、oposition has proven to be compelling,and it is now deeply ingrained in the ecosystem.Globally,the status of passive versus active investments is very different.In Asia and Europe,passive funds hold only 21%and 20%,respectively,of mutual fund and ETF assets,indicating that active management seems to

21、 have a safe haven,at least for the moment.The scenario is driven by multiple factors.In China and other Asian markets,for example,active managers have been able to deliver better-than-average market returns,thereby outpacing any cost advantages to be found in index products.Exhibit 2-Five Pressures

22、 Show the Need for TransformationSources:BCGs Global Asset Management Market Sizing,2023;BCGs Global Asset Management Benchmarking Database,2023;Institutional Shareholder Services Market Intelligences Simfund;BCG analysis.Note:ETF=exchange-traded fund;bps=basis points.69%Growth is no longer guarante

23、ed since market performance has been the main driver of revenues$billions$trillionsPassive funds are increasingly popular 2005Revenues20062022Revenues from net flows partially offset by revenue pressure20062022Revenues frommarket performance 2022RevenuesNet flow into US active fundsNet flow into US

24、passive fundsShare of net flow into USpassive mutual funds and ETFs 90%of totalrevenue growth Revenue from net flowsRevenue pressure9299219351421990199920002009201020229%27%90%5.51.20.20.63.22.4New funds that reach the ten-year markCosts(index,2010)Costs as share of revenueAverage fee(net distributi

25、on costs)201020152022201020152022201020152022Fee compression is accelerating Costs are rising Fewer new products are surviving despite attempts at innovation28 bps27 bps23 bps10012918460%42%35%71%69%72%BOSTON CONSULTING GROUP 4In Europe,however,there are reasons to believe that the amount of money i

26、n passive assets may grow more quickly than it will in Asia.Along with increasing customer de-mand,regulatory changes could provide a more favorable climate for passive management.The UK already requires fair value assessments of investments.Meanwhile,pro-posed amendments to the Markets in Financial

27、 Instru-ments Directive(MiFID)II legislative framework could lead to bans in the European Union on inducements for invest-ment productsa move that could give advisors more incentives to steer their clients to lower-priced passive funds.Pressure ThreeFee Compression Is AcceleratingAs a general rule,a

28、sset management fees are headed down,not up.Pricing is increasingly used as a differentiator not only for passive products but also within the overcrowded space of active products that are otherwise similar to one another.The result is persistent downward pressure that is only accelerating.Since 201

29、0,average fees have declined by more than 15%,a drop that would have generated$55 billion in revenues given 2022s AuM.In last years report,we found that some clients of asset managers were still willing to pay for strong performance.That continues to be the case,but only 50%of industry AuM meets tha

30、t standard.Over the past 10 to 15 years,extraordinary market perfor-mance more than offset the fee pressure on revenue growth and margins,but those days are over.Pressure FourCosts Are Rising The cost base for asset management was built for better times.Since 2010,costs have generally risen in line

31、with AuM growth,which created the impression that margins were stable despite the pressure on fees.However,from 2015 onward,costs as a share of revenue have increased,alluding to cost structures that are unfit for the new environment.We estimate that about 60%of asset management costs are fixed;cert

32、ainly,the vast majority of costs are related to personnel.Looking ahead,we expect that asset managers will need to reduce their cost base by at least 20%to maintain historical levels of profitability.Nothing short of an organization-wide transformation will be required to meet that goal.Pressure Fiv

33、eFewer New Products Are Surviving Despite Attempts at Innovation The asset management industry has perfected the art of slicing and dicing products into niche offerings in an effort to stand out in a competitive playing field.Such offerings have led to an abundance of products,but proliferation has

34、not meant meaningful innovation.In fact,investors are increasingly sticking with established products with reliable track records.A whopping 75%of global AuM in mutual funds and ETFs sits in products that are at least ten years old.Meanwhile,less than 40%of all products launched ten years ago are st

35、ill offered,compared with 60%of all ten-year-old funds in 2010.Simply put,the current approach to product innovation is not working.To succeed in the next decade,asset manag-ers will need to reframe their innovation agendas to in-clude new product categories and value-added services.The Only Choice

36、Is Change The pressures facing asset managers now will continue into the future but without the benefit of rapid market appreciation.According to our estimates,the existing pressures and market expectations are such that if asset managers simply stay the course,their profits compound annual growth r

37、ate(CAGR)will be approximately half the industry average of recent years(5%versus 10%).This is a massive gap that would send shockwaves throughout the industry.5 THE TIDE HAS TURNEDExhibit 3-Asset Managers Must Set a Transformative Path to Return to Profitable GrowthSources:BCGs Global Asset Managem

38、ent Benchmarking Database;BCG analysis.Projected profits(index=100,2022)10030020010%CAGRAchieving profitable growth of 10%requires:Cutting costs by 20%Diversifying so that 30%of revenues comes from higher-margin products5%CAGR2030201520252020Industrys prior trajectory Industrys current trajectory To

39、 get back to historical levels of profitable growth,asset managers will need to address their costs and revenues equally and thoroughly.We estimate that asset managers will need to cut costs by 20%overall.In addition,they will need to shift their revenue mix to generate at least 30%of their revenue

40、from higher-margin products,such as alter-native investments.(See Exhibit 3.)As we scan the industry,few firms have recognized this reality and taken action.Meanwhile,insurance asset man-agers are finding that transformation measures are needed to meet increasingly complex regulatory standards.(See

41、the sidebar“The New Pressure Gauge for Insurance Portfolios.”)Asset managers need to change.They need to embark on a transformative journey and assess all aspects of their existing business model.Those that make the journey stand to emerge strong and resilient for years to come.BOSTON CONSULTING GRO

42、UP 6Managing assets for insurance clients has just become more complex.On January 1,2023,amendments to International Financial Reporting Standards(IFRS)9 and 17 came into effect for the industry,bringing on a new set of ac-counting practices designed to standardize the way mar-ket participants measu

43、re an insurers financial perfor-mance.That includes the key factors of investment return and risk exposure.Not all insurers will be affected by the change:only Euro-pean and Asian insurers will adopt the new principles in total.However,the amendments require adopting new standards that will be trans

44、formational for any global asset manager with insurance clients in Europe or Asia.Asset managers will need to work closely with those clients to achieve optimal performance through a new measurement logic,new criteria for the income statement and balance sheet,and more-detailed reporting requirement

45、s.Though the focus is on accounting,the insurers entire business performance will be examined through a different lens than before.And since IFRS 9 changes the way investment performance is measured as a part of the insurers profit and loss(P&L)statement,portfolio managers may need to rethink existi

46、ng asset-allocation strategies.Under the new measurement logic,assets and liabilities are marked at fair market value instead of at book value or historic value.Marking portfolio holdings this way,on the basis of an estimated market price at the time of the assessment,provides greater transparency a

47、round the insurers financial positions at any given time.However,it is also expected to introduce greater volatility into key performance metrics,because these calculations will be more sensitive to changes in the financial markets.The new rulings will also require that the fair market value of an i

48、nsurers portfolio appears on all quarterly income statements and balance sheets.The valuations must also be defined in a more granular way,through detailed units of account,rather than as past reporting standards required.As a result,insurers can expect more external scrutiny from their investors an

49、d other stakeholders when it comes to examining the impact of investment decisions on their KPIs.Insurers will need the support of asset managers in assuring that the new granular units of account are not showing losses,which will have a direct effect on their P&L statement.Life insurers will have t

50、he additional responsibility of reporting their contractual service margin,which details assumptions about future investment income included in current contracts that will materialize over the life of the policy.It will be the asset managers job to make these assumptions true.We see four main initia

51、tives that insurance asset managers should put in play to support their clients.First,asset managers can help by designing portfolios that will stand up to scrutiny and provide hedges against volatility.For example,managers could consistently monitor earnings at risk and define the acceptable volati

52、lity bands.Second,asset managers can enhance the key investment decision-making processes and tools to make sure that the new measurement logic is ingrained.They should,for exam-ple,be prepared to clarify all of the tradeoffs that come with an investment decision,offering transparent information to

53、all stakeholders on such factors as the duration,equity-to-debt balance,and risk premium.It will also be essential to provide ongoing analysis of the liability side.Third,asset managers can define more-granular portfolio construction rules to steer the allocation toward optimal tradeoffs among retur

54、n,volatility,and risk capital absorption.Stakeholders will expect transparency not only on frequently traded assets(such as equities)but also on less liquid holdings(such as real estate and alternatives),so the asset manager will need to assess those fair market values at regular intervals and ensur

55、e that policyholders find the proposed yields competitive.Fourth,asset managers will need to launch change man-agement actions so that their portfolio teams have the capabilities to look at the business in a new way.Adhering to the new standards may mean,for example,that asset managers who met with

56、insurance clients several times a year in the past now have to schedule monthly or even weekly meetings.Moreover,measuring fair market value on the basis of past and present performance will not be sufficient in the new environ-ment.A transformation strategy should include developing forecasting cap

57、abilities to guide an insurers portfolio decisions.Asset managers may consider partnering with fintechs for these capabilities.Or,they may invest in transformative technologies such as simulation engines that can build out pricing models that gauge not only the fair market value of the existing asse

58、ts but also the impact of various future scenarios.Many large asset managers and captive asset managers of leading insurers have been investing in forecasting models to enhance their capabilities in clarifying tradeoffs.This is a niche that could also create a great deal of value for smaller insuran

59、ce firms.Insurers are currently adapting to the new accounting standards and building the capabilities that theyll need.For the asset managers that service their portfolios,this is a one-time opportunity to add value as deeply engaged partners in the effort.The New Pressure Gauge for Insurance Portf

60、olios7 THE TIDE HAS TURNEDThere is a path forward,but it requires a transformative mindset and a leadership agenda focused on three major themes:profitability(achieved by addressing the cost structure and by funding the transformation journey),private markets(a focus for developing high-growth produ

61、cts that will help significantly diversify revenue),and personalization(a cutting-edge way to own the customer relationship).ProfitabilityOver the past few years,asset managers costs have outgrown revenues by about 2%,on average.In a supportive market,this dynamic has been tolerable and didnt call a

62、ny special attention to cost rationalization.But times have clearly changed.In 2022,asset managers net revenues declined by approximately 11%,compared with their 2021 net revenues.At the same time,total costs were stagnant,and total profits declined by 27%.The decline in profits was more pronounced

63、for North American firms32%while their European counterparts saw profits slump 13%because of a lower decline in net revenues.The typical value chain for asset managers includes a wide variety of costs that firms will need to assess in order to drive savings.What Now?BOSTON CONSULTING GROUP 8Share of

64、 total costs(%)5%20%20%35%15%25%10%25%15%20%FunctionsTypical cost structureAsset manager value chainSales and marketingOtherClient servicesMarketingSales professionalsPortfolio managersand tradersResearchand analyticsOtherOtherOtherOtherTransfer agency Post-trade servicesClient operationsAssetservic

65、esFundservicesApp developmentApp maintenanceApphostingEnd-user technologyRisk managementComplianceFinanceManagement and strategyHRLegal andauditProcurementand facilitiesUtilitiesProduct specialistsInformation technologyOperationsInvestment management and trade executionBusiness management and suppor

66、tTwo-year CAGR6%2%6%2%Sources:Expand;BCGs Global Asset Management Benchmarking Database,2022.Organizations Should Evaluate and Optimize Costs Along the Value Chain9 THE TIDE HAS TURNEDIn order to take action,asset managers need to understand the drivers of key costs,which may come from upstream dema

67、nd(such as from recent product proliferation and in-creasing client needs)or from greater organizational require-ments.(See Exhibit 4.)It is important to scrutinize expenses and what drives them in each function.In addition,asset managers should examine the costs of organization-wide functions.We ha

68、ve identified ten key initiatives that asset managers should consider when designing a plan for controlling costs across the organization.(See Exhibit 5.)Operational and support-function costs can be addressed through many initiatives.For example,asset managers can simplify broadly,across the organi

69、zation,by optimizing managerial capacity,flattening the organization structure,and increasing their managers spans of control.Cost efficiency is not the only benefit of this exercise;it also leads to better decision making,enhanced accountability,and faster and more reliable communication throughout

70、 the firm.By gaining a deeper understanding of how re-sources are being allocated across activities and functions,as well as how the allocations compare with those made by industry peers,a firm will also be better equipped to rightsize support functions.Exhibit 4-Asset Managers Should Identify Key D

71、rivers of Cost GrowthSources:Expand;BCGs Global Asset Management Benchmarking Database,2022;BCG analysis.Value chainSales and marketingInformationtechnologyBusiness management and supportThe increasing number of sales personnel,because clients are requiring a more personalized or specialized sales e

72、xperience and higher service levelsThe increasing product suite and the associated expanded staff,related support,and data and technology in order to expand the implementation of next-generation ways of investing(such as those that use artificial intelligence and machine learning)The increasing numb

73、er of client-driven customizations,the firms expanded footprint,and the higher average cost of investing in private markets all put pressure on operations teams if they have not scaled effectively The investment to build more capabilities,especially in data and analytics;the rising costs of maintain

74、ing legacy systems due to slow decommissioning;and the ongoing migration to the cloudThe expansion of the HR,legal,and finance functions to support business growth without adopting leaner and agile ways of workingInvestment management and trade executionOperationsKey driversBOSTON CONSULTING GROUP 1

75、0It is also essential to address operational costs by balanc-ing the middle and back offices.A firm should review all processes to determine an optimal operating model.As asset managers expand their front-office capabilities,middle-and back-office functions are sometimes left un-touched.At best,the

76、lack of attention to these functions can cause inefficiencies;at worst,it can lead to painful barriers to growth.It is important to uncover the root causes of any issues and address them with surgical preci-sion by assessing the firms sourcing options,its location strategy,and its governance model.W

77、hen it comes to sourcing,many providers that have traditionally specialized in back-office support are now expanding their services further up the value chain.These providers offer asset managers a more seamless support model with improved data capabilities.In considering a location strategy,a firm

78、must consider the best ways to optimize the roles of everyone,including internal employ-ees and external partners,in order to achieve a synchro-nous operation that balances local customization with global scale.Finally,a healthy operations structure must have a robust governance model that is respon

79、sive to the evolution of the business.Simplifying and rationalizing IT is key to lowering costs as well as to ensuring that the firm is efficiently set up for growth.To be certain that an optimal tech setup is in place,asset managers need to assess the maturity of their IT appli-cations across the v

80、alue chain.The assessment should identify areas that would benefit from investment in a solu-tion along with legacy systems that should be retired.Exhibit 5-Ten Proven Initiatives Can Help Address CostsSource:BCG analysis.28103945761Investment management and trade executionBusinessmanagementand supp

81、ortSales and marketing Information technologyOperationsStreamline the coreSimplify the organizationLower real estate and office expensesDivest full business unitsRightsize support functionsReduce third-party spending Simplify ITBalance the middle and back officesOptimize the front office,sales,and m

82、arketingAchieve trade-execution excellenceShed less profitable products and focus on profitable onesOptimize productsShrink to grow11 THE TIDE HAS TURNEDTo address investment management costs,it is critical to conduct a thorough examination of the business model with an eye toward product optimizati

83、on.The long bull market from 2012 through 2022 gave asset managers the opportunity to expand their fund portfolios and explore uncharted territories.Trimming away subscale and unprof-itable products compels a firm to refocus the business in ways that can yield strong value creation.There is nothing

84、new about managing costs to ensure a sustainable and profitable business.However,this time around,the focus should be on optimizing costs in transformative ways instead of simply slashing expenses.Private Markets Alternative investments and the private market opportuni-ties therein continue to be a

85、bright spot for the asset man-agement industry.Alternatives represented more than$20 trillion of global AuM as of year-end 2022.These prod-ucts accounted for half of the industrys global revenues in 2022a milestone that was achieved sooner than industry observers had predictedand generated more than

86、$190 billion in revenues for the firms that offer alter-native investments.(See Exhibit 6.)Exhibit 6-In 2022,Alternative Assets Represented 21%of Global AuM and 50%of Global RevenueSources:BCGs Global Asset Management Market Sizing,2023;BCGs Global Asset Management Benchmarking Database,2023;Institu

87、tional Shareholder Services Market Intelligences Simfund;Pensions&Investments;Investment Company Institute;Preqin;HFR;INREV;BCG analysis.Note:T=trillion;B=billion.LDI=liability-driven investment.Bar chart values may not add up to 100%or to the specified sum because of rounding.1Includes hedge funds,

88、private equity,real estate,infrastructure,commodities,private debt,and liquid alternative mutual funds(such as absolute return,long and short,market neutral,and trading oriented).Private equity and hedge fund revenues do not include performance fees.2Includes equity specialties(such as global and em

89、erging-market active equity,developed-market small cap and midcap,and themes)and fixed-income specialties(such as emerging markets,high-yield,flexible,and inflation linked).3Includes target date,target maturity,liability driven,outsourced chief investment officer,multiasset balanced,and multiasset a

90、llocation.4Includes actively managed developed-market large-cap equity,developed-market government and corporate debt,money market,and structured products.Global AuM by product$36T11%$4T1012124733065412761914141115665551266745396716131611117744131115141015%$7T14%$9T18%$19T21%$20T17%$16T12%$12T29%$29

91、T26%$33T12%$15T15%$20T22%$29T21%$21T25%$31T17%$19T13%$14T30%$32T22%$24T21%$14T15%$10T34%$22T15%$10T22%$8T24%$11T12%$6T37%$17T12%$6T31%$42B41%$73B40%$103B46%$172B50%$193B55%$258B15%$72B9%$44B6%$30B14%$67B18%$68B10%$38B17%$65B19%$71B11%$41B6%$22B6%$22B19%$70B23%$59B12%$30B4%$11B22%$56B24%$43B24%$43B9%

92、$16B26%$35B6%$8B34%$46B3%$3B3%$6B7%$3T49%$18T20052010201520212022Alternative assets1 Active specialties2 Solutions,LDI,and balanced3 Active core4 Passive CAGR(%)2027E200520102015202120222027E10%$4T$47T$65T$109T$98T$128T$133B$180B$260B$376B$386B$470BGlobal revenue by product BOSTON CONSULTING GROUP 1

93、2This strong momentum is expected to prevail,with 7%CAGR in alternative assets over the next five years.This is a growth rate that we expect to see surpassed only by passive investments,which are projected to grow in AuM at approximately 9%annually through 2027.A substantial amount of growth in the

94、alternatives space will be driven by investments in private debt and private equity,both of which are slated to see their global revenues rise by 9%to 10%annually over the next five years.(See Exhibit 7.)THE RETAIL OPPORTUNITYThe continued opportunity to reach retail investors is a key contributor t

95、o the optimistic future for alternative invest-ments.The asset growth in the retail segment has out-paced that of the institutional segment globally from 2012 through 2022.At the same time,technology,product inno-vation,and,in select markets,regulatory reforms,have created tailwinds to democratize a

96、ccess to alternative investments.Globally,retail investors have allocated trillions of dollars to alternative products,with current assets projected to grow by more than 15%annually in the next three to five years.Using private equity funds as a proxy for alternative investments,most of the retail d

97、istribution opportunity exists in the North America and Asia-Pacific regions.These two regions account for nearly 60%and 30%,respectively,of global household investment in private equity funds.Beyond growth,one of the most attractive aspects of retail investment in alternatives is profitability.The

98、fees tend to be higher because retail investors lack the scale that allows institutional investors to pay steeply discounted fees.The retail market is a diverse demographic,however,and asset managers need a strategic plan to address product packaging and investor access points.(See Exhibit 8.)The we

99、althiest retail segment,ultra-high-net worth investors,have a broader suite of products that they can access.Their choices include more institutional-like offerings,such as closed-end and direct funds,tender offers,and interval funds.At the other end of the wealth spectrum,mass-market retail investo

100、rs are limited to more liquid products that have lower minimum investment requirements,pri-marily alternative mutual funds and ETFs,real estate investment trusts,and business development companies.Asset managers need a precise understanding of the retail investor segments that they can access throug

101、h their distribution networks as they define their alternative offer-ings.For example,in the US market,private and trust banks and registered investment advisors represent prom-ising distribution channels because their wealthier clien-tele and asset allocation strategies result in a higher de-mand f

102、or alternatives.This multichannel opportunity also exists in the UK through banks and independent wealth advisors.On the European continent,however,it is imperative that an asset manager have access to the broader universal banking system,as these institutions are the gatekeepers to the majority of

103、retail capital.A comprehensive view of the distribution channels needed to access retail investors is critical to identifying the best fit when bringing alternative products to market.ENTERING THE ALTERNATIVES MARKETNumerous conventional asset managers have entered the alternatives market.These firm

104、s have gathered significant assets,unlocked new offerings to bring to their clients,and catalyzed a high-growth opportunity for their business.(See Exhibit 9.)Among some 30 leading global asset managers that launched an alternatives unit,the AuM for alternative investments and private markets have g

105、rown by an esti-mated 15%to 20%annually over the past five years,amounting to more than$3 trillion.The firms have made more than 50 acquisitions for an instant step up in alterna-tives capabilities.Roughly 90%of the firms have focused on offering private equity,private debt,and real estate products,

106、while 30%have established strategic partner-ships,often with fintechs,or distribution agreements with third parties.The success of these asset managers paints a compelling picture of the growth opportunity in alterna-tives and private markets.13 THE TIDE HAS TURNEDFor firms aiming to enter the alter

107、natives market,there are four primary pathways,all of which contain tradeoffs and operating model design choices.Each pathway is briefly detailed below.Build in-house.Using this approach,a firm builds out its alternatives business in-house,a process that may include acquiring some external teams for

108、 instant upskilling but is otherwise an internal effort.This approach yields the highest potential for integration and synergy with the broader asset management unit,and it affords the parent company more control and oversight.Building in-house often requires a longer timeline to prepare a market-re

109、ady offering,however.Firms with brand strength and extensive distribution have a higher chance of success.Buy and use an affiliate or boutique structure.This pathway involves multiple acquisitions and the use of an affiliate or a multiboutique structure,enabling the eventual full-suite build-out of

110、alternatives or private market asset class offerings.The structure includes the possibility of some integration and synergy across the value chain,primarily in noncore functions.Alternatives investment teams remain independent of one another,each maintaining its own distinct brand.The parent company

111、s primary role consists of managerial oversight,select distribution opportunities and introductions,and best-practice sharing.Exhibit 7-Private Debt and Private Equity Investments Are Expected to Generate More Than 60%of Total Revenue from Alternatives by 2027Sources:BCGs Global Asset Management Mar

112、ket Sizing,2023;BCGs Global Asset Management Benchmarking Database,2023;Institutional Shareholder Services Market Intelligences Simfund;Pensions&Investments;Investment Company Institute;Preqin;HFR;INREV;BCG analysis.Note:T=trillion;B=billion.Revenues exclude performance fees.1Liquid alternatives inc

113、lude respective mutual funds and exchange-traded funds(such as absolute return,long and short,market neutral,and trading oriented).2Real estate includes real estate investment trusts.3Private equity includes venture capital.Global AuM for alternatives by product$4T$7T$9T$19T$20T$29T$42B$73B$103B$172

114、B$193B$258B20222027E CAGR(%)20222027E CAGR(%)20052010201520212022Liquid alternatives1 CommoditiesInfrastructurePrivate debtHedge fundsReal estate2 Private equity3 2027E200520102015202120222027EGlobal revenue from alternatives by product 21%25%26%36%39%43%42%28%24%24%23%21%27%28%31%21%19%16%5%5%6%6%7

115、%4%6%6%7%4%2%1%3%3%8%3%5%4%3%3%2%4.04%4%5%26%31%29%46%50%58%22%15%12%12%11%9%47%2%2%1%1%1%1%2%2%1%2%3%2%2%2%2%3%1%45%49%32%29%22%4%3%3%3%2%4%5%5.79.610.13.24.79.02.13.16.49.90.11.89.4BOSTON CONSULTING GROUP 14Exhibit 8-Asset Managers Need a Strategy for Packaging Retail Alternatives and Identifying

116、Investor Access PointsSources:Expert interviews;Preqin;BCG analysis.Note:ETF=exchange-traded fund;REIT=real estate investment trust;BDC=business development company.1These are illustrative terms;the exact financial criteria may vary.Liquidalternatives Traded REITs and BDCsNontraded REITs and BDCsInt

117、erval fundsTender offersClosed-end and direct fundsInvestmentvehicleCommonaccesspoints andmethods Traditional oralternative managerswith a mutual fundor ETF lineup Accessed in brokerage or exchange,direct or via a wealth manager Traditional orspecialized managerswith REIT and BDCproducts Accessed in

118、 brokerage or exchange,direct or via a wealth manager Direct vehicles,typically accessed viaan advisor orintermediary Some availabilityvia institutionalplatforms General partners,funds of funds,andsecondaries,accessed directly May utilize institutional pooling platforms General partners,funds of fun

119、ds,andsecondaries,accessedvia an advisor May utilize institutional pooling platforms General partners,funds of funds,andsecondaries,accessedvia an advisor Some availability viainstitutional poolingplatformsMass-marketretail1Lower-high-net-worthand affluentindividuals1High-net-worthindividuals1Ultra-

120、high-net-worthindividuals1MinimumsandilliquidityLower minimum and more liquidHigher minimum and less liquidDirect and brokerage or wealth advisor drivenWealth advisor drivenExhibit 9-Alternatives Create Significant Growth Opportunities for Traditional Asset ManagersSources:Company websites;investor

121、presentations;investor transcripts;Preqin;Pensions&Investments;BCG analysis.Note:All figures are based on a benchmarking exercise using a sample set of 30 traditional asset managers that have launched alternatives and private market offerings.Their AuM of more than$3 trillion includes alternative fu

122、nds of funds and secondary fund assets.$3T+Alternative and private market AuM15%20%Estimated five-year CAGR of alternative andprivate market AuM,on average90%Share of firms bringing private equity,realestate,and private debt products to market60%Share of firms bringing hedge fund strategiesto market

123、50%Share of firms bringing liquid alternativesto market30%Share of firms with fintech or other distributionpartnerships8%12%Share of a firms total AuM in alternative andprivate market products 50+Number of acquisitions made to expandalternatives capabilities15 THE TIDE HAS TURNEDSources:Expert inter

124、views;BCG analysis.Build in-houseBuy and use anaffiliate or boutiquestructureBuy and operateindependently Establish partnershipsDescriptionand keyfeatures Build out alternatives capabilities in-house May need to acquire external teams Allows for high integrationand more control by parent company Hig

125、h cost;requires an established brand and strong distribution capabilities Acquire alternatives firm and use a multiple affiliate or boutique model Partial integration is possible across noncore functions Can build a broad suite of alternatives through acquisitions Parent company supports brands whil

126、e providing distributionLevel of integration between alternatives functions and traditional functions for each activity in the value chain Acquire alternatives firm that will remain indepen-dent Full autonomy is a key to success Seek products that fill gaps and clients needs Nearly all functions rem

127、ain independent Develop partnerships or distribution agreements Provide third-party products,rather than proprietary ones Alternatives partners benefit from unique distribution access Scalable,but must optimize shared economicsInvestmentmanagementSales anddistributionMiddle andback officesCorporatea

128、nd sharedservicesHighLowHighLowHighLowHighLowAsset Managers Should Consider Four Paths for Launching an Alternatives BusinessBOSTON CONSULTING GROUP 16 Buy and operate independently.A firm following this model must make at least one acquisition to gain an al-ternatives investment capability.Full aut

129、onomy is a key success factor for the operating model,and nearly all functions across the value chain are kept detached from the parent company.Independence and the alignment of incentives are critical to the performance of the in-vestment team and to keeping the sales and distribution staff from th

130、e acquired firm in place.Products are highly targeted,determined by the parent companys capability gaps and an analysis of which offerings are most likely to boost the overall financial performance.Establish partnerships.In this case,an asset manage-ment firm develops distribution agreements,joint v

131、entures,or other strategic partnerships to ensure that client demands for alternatives are met.The partnerships are designed to marry the distribution capabilities of the established traditional asset manager with the best-in-class alterna-tives investment capabilities of a third-party manager.Exclu

132、sivity agreements are common.Some co-investment may be required for shared middle-and back-office capabilities,such as onboarding and reporting,since scalability is a key driver for the shared operating mod-el.While such partnerships are cost effective in nature,it is essential that all participants

133、 optimize the shared economics in order to have a successful arrangement over the long term.When we look at these four market-entry pathways,it becomes clear that no one archetype is more successful than anotherall methods are viable.The alternatives market has existed for decades,and traditional as

134、set managers have been entering(and exiting)the space for some timelong enough to make it clear that the most important characteristics of a successful alternatives unit revolve less around a firms method of entry and more around its execution.In studying initiatives related to alternatives and spea

135、king with executives who have led them,we have identified five core principles of success in establishing an alternatives business.Perfect the value proposition.The strongest alternatives units are built around a harmonized value proposition.A traditional asset manager bringing an alternatives team

136、onto its platform must convey the benefits of doing so and deliver on that promise.Examples of the benefits can come in the form of expanded distribution,such as obtain-ing access to retail distribution;a path to scalability through such means as shared services or middle-and back-office operations;

137、or even a strategic capital partner-ship,gained,for example,by recapitalizing the founding teams equity or co-investing in strategic projects.Simultaneously,the value proposition for the traditional asset manager comes in the form of unlocking new invest-ment capabilities;the addition of a high-marg

138、in,accretive business unit;and an elevated ability to meet increasing investor demands for exposure to alternatives.A definitive shared-value proposition between the traditional and alternatives businesses is a key ingredient to success.Tailor incentives to drive growth.Distinct incentive structures

139、 are essential to driving the growth,recruitment,and retention of management teams for alternative invest-ments.Traditional asset managers pursuing alternative offerings need to adopt a variety of incentivizing tools to ensure that the alternatives team delivers strong perfor-mance.This may come in

140、the form of compensation schemes,such as increasing carried interest or providing stock options of the parent company.Some firms we studied have strategically incorporated longevity into their incentive structures;for example,some use milestone-based bonus pools that are aligned with fundraising goa

141、ls.An optimal incentive arrangement will produce strong investment performance,retain the current alternatives team,and attract top talent to grow it.Preserve the autonomy of the alternatives team.Irrespective of how a traditional asset manager enters the alternatives market,a consistent determinant

142、 of success revolves around autonomy.The highest-performing alterna-tives teams are kept independent of the traditional asset management business.That means incorporating an operating model that protects the autonomy,culture,and often the brand of the alternatives team.Seeking out cost-saving and ef

143、ficiency-producing opportunities across the value chainfor example,through centralizing corporate services or integrating some middle-and back-office functionsis entirely possible,as long as the core alternatives front-office team remains detached.Multiple firms cited this as the biggest driver of s

144、uccess in their alternatives business and often a key criterion for closing an M&A deal.Optimize distribution and fundraising.Assuring the continuity of sales and fundraising while forging new distribution opportunities gives an alternatives business a secure foundation with the prospect of strong g

145、rowth into the future.Traditional asset managers can provide anchor capital to aid fundraising efforts and form a specialized alternatives sales team to certify that the right expertise is being deployed in distribution activities.In a merger or acquisition,the target should engage their limited par

146、tners or existing investors early in the process to address concerns and gather consent.17 THE TIDE HAS TURNEDManagers can identify additional distribution opportunities by leveraging existing institutional relationships and encouraging collaborative efforts between the institutional and alternative

147、s sales teams.Meanwhile,the strategic pursuit of new growth areas,such as retail,can uncover future sources of asset flows.Align strategic interests.The most successful alterna-tives units have been formed around the alignment of strategic interests.When building,buying,or partnering with an alterna

148、tives team,a traditional asset manager must have full conviction in the underlying alternatives business and,therefore,possess a fundamental belief in value creation.Furthermore,the bold decision to expand into alternatives must be a strategic priority among the firms top leaders,who must then commu

149、nicate their plans and rationale to all of the organizations stakeholders.It is essential to go in with an underlying hypothesis and commitment to the notion that the future of asset management encompasses alternative investments.The alternatives arena is one of the most prosperous avenues across th

150、e asset management industry.This much-in-demand asset class meets investor goals of in-creased diversification and return potential while,at the same time,creating an unprecedented profit opportunity for the firms that manage it well.Asset managers that skillfully enter the alternatives market and c

151、apture the upside can forge an accelerated path toward success.PersonalizationOwning the customer experience will be as important as having good products in the years ahead.Advances in data availability,data science,and computing power now make it possible to create true personalization in the asset

152、 management industry,much like consumers experience when they use entertainment platforms and service apps.Personalization will span both the client experience and products.THE CLIENT EXPERIENCEPersonalized engagement already exists in asset manage-ment.In the US,where asset managers are often indep

153、en-dent businesses,employees of the wholesaling function of an asset manager typically call on a financial advisor to discuss the advisors needs,which is a version of personal-ization.The problem is that this method doesnt scale efficiently to serving thousands of advisors,so its an ex-pensive propo

154、sition.Nor is it possible for even the most talented wholesaler to keep track of all the relevant infor-mation about their client book.New technologies,however,can provide a huge boost to personalization efficiency and effectiveness.For example,systems that have automated features can help marketers

155、 engage prospects in a dialogue.A marketer sends purpose-built multichannel communications(such as targeted educational and product emails and content interactions on web properties)to a prospect,and the system captures and processes every interaction and recommends the next step on the basis of the

156、 prospects responses.The interaction continues largely automatically until the threshold for personal engagement is reached.At that point,the marketing team has a truly warm leadone with a huge amount of datathat it can hand off to the wholesaling function,dramatically increasing the odds of a succe

157、ssful conversion.By deploying such technologies,we have seen asset managers increase their sales conversion rates by about 20%relative to traditional approaches.Once a prospect becomes a client,a client data system can guide an asset manager using a new set of data and ana-lytic capabilities.It will

158、 be possible to create fully automated lists that synthesize all known opportunities,risks,and relationship metrics in one place,delivered in natural-language sentences that clearly explain why an advisor is on the list.For example,similar to the way a device for a global positioning system can scop

159、e out the best route,a client data system can recommend tailored actions,including marketing packages that launch automatically with a click of a button.Lets say that a smaller account holder is starting to express an interest in a new product;the system knows this because the advisor recently visit

160、ed the product page.The system also knows that advisors of a similar size have recently increased their purchases of the product.Rather than scheduling a call,which can be time consuming and,therefore,expensive,the system prompts the wholesaler to hit a button on the computer screen labeled“launch c

161、ross-sell package A.”That one click sends out preprogrammed,multichannel educational content to entice the client to learn more and,ideally,purchase the product.BOSTON CONSULTING GROUP 18Source:BCG analysis.Note:ETF=exchange-traded fund,SMA=separately managed account.LeadsThird-party dataCurrent cus

162、tomer dataLookalike modelingClient journeyEngagement examplesData evolutionLimited viewMarketingAsset managers can provide more-personalized products the more they know their clientsSales Customer 360 viewMarketed productsProspectInformed outreachLong-term clientClientEducational and product emailsE

163、ducational and product emailsCreativepersonalizationName,contact information,demographics,and locationETFs and mutual fundsBrand marketingWebsite and app interactionsWebsite and app interactionsSales callsGeneral educational emailsPersonal callsPersonalized emailsPlatform and app interactionsReminde

164、r emails and text messagesETFs,mutual funds,and SMAsETFs,mutual funds,SMAs,and direct indexingAsset allocation,fund holdings,web interactions,and interest in contentTrade behavior(purchases and redemptions),performance,and call interactionsPersonalizedproductsLeadProspectClientPersonalization Can Be

165、 Applied Throughout the Client Journey in Marketing,Sales,and Products19 THE TIDE HAS TURNEDSuch systems can be implemented now,but many asset managers face challenges with data integrity,technology capabilities,data science talent,and buy-in from the sales team.Overcoming such barriers should be a

166、top priority.The power of personalization will lead to a winner-take-most dynamic,in which the firms that truly know their customers stand to earn more than a fair share of capital inflows and lock in longer-term trusted relationships.PERSONALIZED PRODUCTS USING DIRECT INDEXINGThe vast majority of p

167、roducts sold to retail customers are one size fits all.Customization(through products such as separately managed accounts)is reserved for ultra-high-net-worth individuals or institutional segments.Direct(or custom)indexing(the ability to create highly customized portfolios at scale)has the potential

168、 to change the game by unlocking the potential for truly personalized products at scale for affluent individuals.Gaining access to these retail investors requires asset managers to determine how they are going to build this disruptive technology into their transformation plan;if they dont,it could p

169、resent an existential risk to their business.So far,the US has been the main adopter of direct index-ing.The past several years have seen AuM from portfolios built with direct indexing more than quadruple,rising from roughly$100 billion to more than$450 billion since 2015.Technological advances have

170、 unlocked the ability to scale in recent years,but direct indexing really caught on in the US after fractional shares and zero-fee trades went main-stream in 2019.These initial developments helped create a perfect storm for the popularity of direct indexing in a market where investors already favore

171、d passive products.Customization offers them additional benefits,such as the ability to choose which underlying components to sell during drawdowns,selectively allowing for greater tax alpha realization than an ETF could offer.There are also clear benefits from an asset managers perspective,such as

172、higher fees(compared with passive funds)and long-lasting investor relationships.What most asset managers may not have fully realized,however,is that there has been a shift in who creates value.Direct indexing works in much the same way that some streaming services make it possible for customers to d

173、own-load and mix individual songs,instead of buying albums.Direct indexing enables advisors and their clients to buy securities one at a time and mix them into an individual-ized portfolio.With that,the power to create value shifts from the asset manager to the end customer.The largest wealth manage

174、rs have been very transparent about their intention to let advisors create customized portfolios,essentially bypassing the traditional asset management distribution value chain.Many asset managers weve spoken to have not fully processed this implication.Nevertheless,the technology that makes direct

175、indexing possible is here to stay,presenting risks to asset managers but also multiple opportunities.(See Exhibit 10.)Three Strategies.The successful implementation of direct indexing will require a number of considerations,and a game plan is essential.Asset managers must be able to clearly identify

176、 the firms goals and technological capabilities.They must also weigh one strategy against another:Product Play.The lightest-touch direct indexing offering is a tax-focused product with limited customization.The product makes it possible for asset managers,particular-ly those that already have existi

177、ng tax-focused products,to limit the risk of direct indexing disintermediation without having to make significant resource commit-ments.Current investors can achieve tax alpha benefits,while new investors may have an incentive to leave competitors that lack comparable offerings and come on board.Sin

178、ce the demand for these direct indexing products is driven by investors who prioritize tax efficien-cy,providing a tax advantage through a product that has a plain-vanilla portfolio with limited customization can be a highly replicable and scalable offering with limited operational impact downstream

179、.Platform Play.For asset managers that do not have a significant wealth-management client base,direct indexing is an opportunity to provide investors with a quasi-wealth-management experience at scale,without requiring a large staff of advisors.For clients who are comfortable with self-service,the a

180、bility to develop total portfolio solutions with customization can be a compel-ling offering.A likely starting point would be to combine this with an existing or new robo-advice offering to provide wealth services,further differentiating the value proposition.A platform play of this nature can unloc

181、k additional revenues beyond the currently captured prod-uct fees.Service Play.Another strategy that can lead to success in the direct indexing space is to develop a white-label service for wealth managers who lack the scale and sophistication to build or buy direct indexing themselves.Taking this a

182、pproach positions the asset manager as a value-added service provider whose expertise can be monetized through either a fee for service(such as a subscription-based business)or through increased customer share of wallet and loyalty.Firms that build a direct indexing service can leverage their scale,

183、selling their technology to smaller shops and regional players.While white-label service players risk having to compete with fintechs,a strong service-based offering can increase the stability of earnings that are not reliant on market outperformance.BOSTON CONSULTING GROUP 20Key Considerations.As a

184、sset managers evaluate these different end-states,they will also need to determine how theyll enter the direct indexing business.They may partner with a vendor,build the capability in-house,or acquire an existing player.The key decision drivers will be which end-state they desire,along with their ti

185、me-to-market goals.For asset managers that prioritize speed to market and minimizing operational impact,partnering with a vendor will meet their needs,with the tradeoff of giving up some margin to the provider.To build the capability in-house assures that the asset manager can retain the fees charge

186、d for direct indexing,but it also requires devoting significant time and capital to the transformation effort.Buying an existing player is a great way to acquire all of the necessary capabilities,gain a customer base,and retain the margins,but the acquiring asset manager must be willing to make a la

187、rge initial capital outlay and a commitment to managing the integration.Exhibit 10-Winning in Direct Indexing Requires a Game PlanSources:Expert interviews;BCG analysis.Product playProduct andprice landscapeRemain competitive with an enhanced tax-focused product that limits customizationPartner with

188、 a vendorLaunch quickly with minimal operational requirements necessary to supportConsider fee potential in decision to launchFees are starting to compress,making it necessary to create scaleGenerate higher fees from active portfolios to cover costsAsset managers must set limits on passive customiza

189、tions to keep costs aligned with feesIn-housecapabilitiesImplement essential infrastructure Fractional shares and zero-fee trades must be supported internally when they are available across marketsStreamline operational requirementsMaximize connectivity across the value chain,reducing manual touch p

190、ointsDistribution positioningTailor strategy to current distribution relationshipsWire houses are mature with large volumes,while registered investment advisors need to be developedResourcecommitmentUpskill or hireUse existing talent who has adjacent product knowledge,or bring in direct indexing vet

191、eransFocus leaders for 6 to 12 monthsPrioritize building an automated systemBuild in-houseTake time to create a solution that meets clients needs while retaining marginsBuy an existing playerAcquire a firms intellectual property and talent,as well as its existing customers and retained marginsPlatfo

192、rm playProvide digital advisory to investors,allowing customization on existing productsService playBuild direct indexing as a white-label service,selling to smaller shops and regional playersThree strategiesThree ways to enter the business Key considerations 21 THE TIDE HAS TURNEDInternally,asset m

193、anagers that want to get into direct indexing products need to evaluate a number of core factors to ensure success.In particular,they should consid-er such details as product pricing,resource commitments,existing capabilities,and distribution positioning.When it comes to the product and price landsc

194、ape,asset managers must be careful not to treat direct indexing as a silver bullet against margin pressures.Direct indexing has not been immune to the fee compression that has plagued many areas of the industry.As it has received more atten-tion,competition has increased,and average fees have alread

195、y fallen by roughly a third,with more room to decline given that performance costs are relatively low.Firms must also consider how freely they will allow customization,as straying into too many permissible positions invites opera-tional complexities that could be more akin to an active strategy than

196、 a passive one.A viable compromise is to institute customization within a core-satellite model.In this model,large portions of the portfolio are standardized with limited customization,while a smaller part of the portfolio has increased flexibility.While talent and resourcing have been top concerns

197、for the past couple of years,these factors will be particularly important to succeeding with direct indexing.Building a transformative framework will take an outsized level of effort at the beginning.The firms leadership should plan to make it their main focus for approximately 6 to 12 months.In add

198、ition,given that the pool of people with experience in this area is small,asset managers may want to consider cross-training in-house talent with strong experience in tax-focused or index-based products before looking to hire or acquire talent.It will be important to have this special-ization across

199、 the value chain,as sales teams,investment management staff,and technology specialists will have a role in making decisions that ultimately impact investment performance.Having the internal capabilities to scale automation across the value chain is also critical to success.Fractional shares and zero

200、-fee trades are key to enabling direct indexing,so the firm must have these capabilities in systems across the value chain.In addition,the tech stack must be configured to have strong connectivity throughout,enabling automation in the rebalancing engine,trade execution,and client report-ing.Even wit

201、h best-in-class automation,asset managers may experience difficulties quickly processing complex transac-tions,so they should be prepared to handle constrained positions and large redemptions,both of which will require specialized knowledge to resolve.Asset managers with existing expertise in separa

202、tely managed accounts will be well positioned to leverage their risk management,compli-ance,and other enabling functions,given the similarity between these accounts and direct indexing.Existing distribution channels will play a significant role in an asset managers ability to roll out direct indexin

203、g.In the US,wire houses have been the quickest to educate them-selvesand their clientson direct indexing.As a result,the partnerships theyve forged,especially when combined with their large volumes,have made them the preeminent channel for direct indexing.For asset managers with a larger concentrati

204、on of registered investment advisors,a well-designed product with streamlined integration will be key to convincing the advisors to grow their direct indexing offer-ings.Asset managers connected with family offices,which often follow investment strategies that are aligned with a set of principles,wi

205、ll find that strong customization capabilities are key to winning clients over to direct indexing.After years of organic growth and record profits,asset managers must now test their mettle.The markets are full of uncertainties,and the march of technology is bring-ing inevitable changes to the way fi

206、nancial services firms serve their clients.It is,therefore,more important than ever for asset managers to transform and build more innovative organizations.On the bright side,however,the path to transformation is clear and imminently achievable for most.The leaders who take action now are the ones m

207、ost likely to survive and thrive in the decade ahead.BOSTON CONSULTING GROUP 22Appendix 1-Asset Managers Profits Fell Significantly in 2022,While Costs Remained ConstantSource:BCGs Global Asset Management Benchmarking Database,2023.Note:Analysis is based on a benchmarking study of 74 leading asset m

208、anagers that represent$62 trillion in AuM,or about 63%of global AuM.1001422382272010202220152021100134200179202220102015202128.326.524.222.72021201520102022100129184184202120102015202220.118.215.616.420222021201020151001442331692010202120152022293236282022201020212015Net revenues,(index)Net revenues

209、 as a shareof AUM(basis points)Costs as a share of AUM(basis points)Profits as a share of netrevenues(%)Costs(index)Profits(index)Average AuM(index)5%11%0%27%Appendix23 THE TIDE HAS TURNEDAppendix 2-Global AuM Fell 10%in 2022,with North America and Europe Being the Main Drivers of the Decline Source

210、s:BCGs Global Asset Management Market Sizing,2023;The Economist Intelligence Unit;Institutional Shareholder Services Market Intelligences Simfund;WTW;government agencies,including regulators;BCG analysis.Note:Market sizing was performed on assets sourced from each region and professionally managed i

211、n exchange for management fees.The market sizing included the captive AuM of insurance groups and pension funds that were delegated to asset management entities in exchange for fees paid.Globally,44 markets were assessed,including North America(Canada and the US);Europe(Austria,Belgium,Czech Republi

212、c,Denmark,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Luxembourg,the Netherlands,Norway,Poland,Portugal,Russia,Spain,Sweden,Switzerland,Turkey,and the UK);Asia-Pacific(Australia,Hong Kong,India,Indonesia,Japan,Mainland China,Malaysia,Singapore,South Korea,Taiwan,and Thailand);Middle East and

213、 Africa(selected sovereign wealth funds of the region and mutual funds,plus Morocco and South Africa);Latin America(Argentina,Brazil,Chile,Colombia,and Mexico);and offshore AuM(which is not included in any region).For all countries where the currency is not the US dollar,the end-of-year 2022 exchang

214、e rate was applied to all years to synchronize current and historic data.Values differ from those in prior studies because of exchange rate fluctuations,revised methodology,and changes in source data.GlobalAuM($trillions)North AmericaEuropeJapan and AustraliaLatin AmericaAnnual growth20102015Annual

215、growth20052010Total AuMAnnual growth20152021Annual growth20212022Middle East and AfricaAsia-Pacific(except Australia and Japan)36.446.665.2108.698.3201020052015 2021 20225%7%9%10%19.124.131.654.046.5202220052021201020155%6%9%14%AuM($trillions)AuM($trillions)AuM($trillions)AuM($trillions)AuM($trillio

216、ns)AuM($trillions)11.013.017.524.922.2201520052010202120223%6%6%11%3.13.44.97.37.12005 20102021201520222%7%7%3%0.30.61.01.81.92022200520102015202117%12%11%5%0.60.91.21.51.62022200520102015202110%5%3%5%1.03.07.216.0 16.32005202220152010202125%19%14%2%BOSTON CONSULTING GROUP 24Appendix 3-ETFs and Sele

217、ct Alternative Products Are Expected to Lead Growth Through 2027Sources:BCGs Global Asset Management Market Sizing Database,2023;BCGs Global Asset Management Benchmarking Database,2023;Institutional Shareholder Services Market Intelligences Simfund;Pensions&Investments;Investment Company Institute;P

218、reqin;HFR;INREV;BCG analysis.1Management fees net of distribution costs.2Includes actively managed developed-market large-cap equity products.3Includes actively managed developed-market government and corporate debt.4Includes global equities,emerging-market equities,developed-market small caps and m

219、idcaps,and themes.5Includes emerging markets,high-yield,flexible,and inflation-linked products.6Includes target-date funds,target maturity products,and outsourced chief investment officer.7LDI=liability-driven Investment.8Includes absolute return,long and short,market neutral,and trading-oriented mu

220、tual funds.9EFT=exchange-traded fund.050100150200303691215Net revenue margin(basis points)1StructuredAuM growth,20222027E(%)Equity core2Fixed-incomespecialties5Funds ofhedge fundsFixed-income coreMoneymarketSolutions6PassivefixedincomeBalancedEquity ETFsFixed-income ETFs9LDIs7Hedge fundsPrivate equi

221、tyFunds of privateequity fundsEquity specialties4InfrastructureCommoditiesPrivate debtLiquid alternatives8Real estateEstimated 2022 AuM of$1 trillionActive core productsActive specialty productsAlternativesSolutions and LDIsPassive products(excluding ETFs)ETFsPassiveequity25 THE TIDE HAS TURNEDAbout

222、 the AuthorsChris McIntyre is a managing director and partner in the New York office of Boston Consulting Group.You may contact him by email at .Simon Bartletta is a managing director and senior partner in BCGs Boston office.You may contact him by email at .Joe Carrubba is a managing director and pa

223、rtner in BCGs New York office.You may contact him by email at .Dean Frankle is a managing director and partner in BCGs London office.You may contact him by email at .Bingbing Liu is a managing director and partner in BCGs Shanghai office.You may contact him by email at .Michele Millosevich is a prin

224、cipal in BCGs Milan office.You may contact him by email at millosevich.michele .Edoardo Palmisani is a managing director and partner in BCGs Rome office.You may contact him by email at .Neil Pardasani is a managing director and senior partner in BCGs Los Angeles office.You may contact him by email a

225、t .George Rudolph is a partner in BCGs New York office.You may contact him by email at rudolph.george .Brian Teixeira is a project leader in BCGs Boston office.You may contact him by email at teixeira.brian .Sultan Alsubaihin is a consultant in the firms New York office.You may contact him by email

226、at .Philip Bianchi is a partner in the firms New York office.You may contact him by email at .Peter Czerepak is a managing director and senior partner in the firms Boston office.You may contact him by email at .Lubasha Heredia is a managing director and partner in the firms New York office.You may c

227、ontact her by email at .Gleb Margolin is a consultant in the firms Seattle office.You may contact him by email at .Miftah Mizan is a project leader in the firms Los Angeles office.You may contact him by email at mizan.miftah .Ian Pancham is a managing director and partner in the firms New York offic

228、e.You may contact him by email at .Kedra Newsom Reeves is a managing director and partner in the firms Chicago office.You may contact her by email at .Blaine Slack is a lead knowledge analyst in the firms Chicago office.You may contact him by email at .Andrea Walbaum is a knowledge expert in the fir

229、ms New York office.You may contact her by email at .AcknowledgmentsThe authors are deeply grateful for the contributions of their colleagues.In particular,they thank Francesco Bigonzetti,PJ Fallon,Chad Jennings,Chetan Kashyap,Sonali Maheshwari,Anirudh Matam,Nisha Mittal,Silvio Palumbo,Barric Reed,Ri

230、chard Rouse,Vipin Shrivastava,and Shubham Utsav.For Further ContactIf you would like to discuss this report,please contact one of the authors.Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities.BCG w

231、as the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global

232、 teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,technology and design,and corporate and digital ventures.We work in a uniquely collaborative model across th

233、e firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.Boston Consulting Group 2023.All rights reserved.5/23For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and Twitter.27 THE TIDE HAS TURNED