In the peculiar year 2020, the world’s asset managers grew their assets under management by 11 percent – but their profits only by 1 percent. This shows in a report by consultancy BCG, who recommends asset managers to offer private-market products to retail investors, and get better at advanced data and ESG savvy.

For the first time, the global industry’s total assets under management crossed the fifteen-digit line – the one for $100 trillion dollars, if that is any more intuitive, landing at $103 trillion per end-2020. The 11-percent growth in the year was equal between retail portfolios, which make up 41 percent of the assets, and institutional investments which make up the remaining 59 percent. Growth came mostly from asset-price uptick. Zooming in on net inflows, retail investors put in new money corresponding to 4.4 percent of their start-of-year holdings, while the net inflow from institutional investors was equivalent only to 2.2 percent of their initial portfolio value for the year.

Profitability “largely flat”

“Yet across the board, profitability was largely flat in comparison with 2019, as costs and fee compression kept operating profits hovering at around 34% of net revenues,” BCG notes in its report.

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To get out of their margin squeeze, BCG encourages asset managers to seek to become what it calls private market investment leaders: “Strategies include developing such products for retail investors, gaining an edge in advanced data and analytics, and moving to the forefront of environmental, social, and governance (ESG) strategies for private market portfolios.”

On the institutional side, it sees an important role for asset managers to play “in steering their insurer clients into alternative strategies, as well as the industry’s escalation into next-generation distribution”.