Asset Management Will Face Greater Headwinds in 2012: McKinsey Report

McKinsey advises that asset management firms will need to bring "investment-like discipline" to their sales and marketing efforts. Asset managers will also need to take a hard look at their maturing lines of business, such as mutual funds, to determine where they can restructure rather that just reduce costs.

By 2012, McKinsey expects independent asset management firms to increase their share to two-thirds of industry AUM "as banks and insurance companies continue to divest their asset management businesses, compensation constraints make it increasingly difficult for banks to compete for talent, and the growing differential between valuations for banks and insurance companies versus asset managers makes it a challenge for them to compete for accretive deals." 

With the market proving unreliable in 2011 and 2012, asset managers will need to tackle the business model issues at the center of rising costs, lower prices and high variability of margins, or risk structurally lower profitability in the years ahead, the report warns.

Looking ahead to 2015, McKinsey cites several trends that will shape the asset management industry and provide the most significant opportunities for growth over the next three years. Among the major areas of growth will be retail alternative products, retirement solutions, ETFs and emerging markets.