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Asset management growth due to ageing and pensions

GLOBAL – Ageing populations and shifting pension arrangements mean that global asset management is a growth industry, according to a new report from Standard & Poor’s.

“Demographically, asset management is a growth industry, supported by ageing populations of the industrialised countries and the need to shift from state pension programmes to private ones,” the report says.

And the report also points out the importance of asset managers’ relationships with consultants. “For the major players, the future appears more focused on expanding distribution, focusing on relationships with consultants, multiple retail channels, and an efficient IT bases to support a wide band of products – both internationally and domestically – as well as fund administration and process.”

The report says that although the business provides stable income for parent companies – between 428-478 billion dollars in 2002 - the idea that asset management is “easy money” does not hold water.

"The motivation of "easy money", however, which has driven financial institutions to build up asset management services over the past decade is less compelling,” said S&P credit analyst Walter Pompliano. He said performance expectations are “currently much more circumspect”.

The report adds that despite a lot of mergers and acquisitions in the industry in the last 10 years, the industry remains highly fragmented.

There were no “immediate threats” to the outlook or ratings on the largest players in the market, S&P said. Most of the firms it looks at have the “franchise and scale” needed to support a viable long-term position in asset management.

“For the asset managers with scale, the positives of the asset management business segment outweigh the issues of some overcapacity and current performance pressures.

“The global banks with strong private banking strategies and strong distribution are winning. Although there is disappointment in expected returns, asset management is still viewed as a positive contribution to the bottom line.”

The eight-page report is entitled “Achieving Balance – the Keys to Success for Global Asset Management”.

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