European AM industry to see plummeting growth rate
EUROPE- Growth in revenues and assets under management is expected to slow rapidly in Europe over the coming four years according to a report out today by strategy consulting firm, Oliver, Wyman and Company, and UBS Warburg.
The report, “The Future of Asset Management in Europe”, predicts assets under management in Europe will rise from e15trn in 2001 to just e22trn in 2006 – an annual growth rate of 7.4% compared to rates of more than 20% seen in the 1990s. Revenues are estimated to rise from e122bn in 2001 to e156bn in 2006 – an annual growth rate of 5%.
On a regional basis, the UK and Ireland are predicted to experience the slowest average annual rate of growth in both assets under management and revenue at 6.25% and 3.3% respectively. Spain and Portugal should see the fastest growth rates at 10.4% for assets under management and 7.6% for revenues.
Oliver, Wyman and UBS Warburg blame the recent declines and uncertain future growth in global stock markets for the bleak outlook for Europe. Asset managers, they say, believed the downturn to be only temporary, and instead relied on opportunities created by pension reforms and higher-margin offerings in hedge funds to counteract the negative damage. But, states the report, pensions and alternative investments are not to be regarded as “life-savers”.
Pension reform is expected to produce just e400bn of additional assets under management in the next five years, whilst increases in hedge funds and other alternative investments will only add e676bn to assets under management.
Management will therefore have to seek cost efficiencies, through outsourcing back-office functions or cutting payroll costs, or be forced to divest parts or all of their current operations. Several companies have already sold off their fund management subsidiaries, and last week saw Rothschild put its asset management operation up for sale.