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Asset managers at “inflection point” – KPMG

(Corrects name to KPMG) GLOBAL – The global investment management industry is at an “inflection point”, driven by weak markets and scandals, according to a report by KPMG and CREATE.

“It is widely accepted that the global investment industry is at an inflection point: the future will be very different from the past,” the 60-page report says.

“The sheer scale of losses suffered by investors in the last bear market is one reason. The others are mutual fund scandals in the US, pensions mis-selling in the UK and general investor nervousness everywhere.”

The report said that more intrusive legislation is “inevitable” as are “tight fiduciary disciplines”.

The report – ‘Raising the performance bar: challenges facing global investment management in the 2000s’ - argues that “a business model that only worked in a bull market is no longer tenable in what now looks like a low nominal return environment for the foreseeable future”.

And the report includes a survey of market participants that found that the appetite for equities is “likely to return” in the next two years. This would be in spite of changes such as the switch to bonds, hedge funds and absolute returns.

It said that liabilities management would be a feature in the next two years. It added: “The new trend towards absolute return products – cash and alternatives – as well as liability management products is indicative of the evolution of a new implicit contract under which pension trustees, their consultants and investment managers are identifying more robustly the long-term liabilities of trustees, their risk appetite and the flexibility they need.”

Respondents said that improving relationships with pensions consultants is among a set of actions that could be taken in the next two years in order to boost growth.

KPMG and Create polled 300 investment managers in 29 countries – and conducted 70 interviews.

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