The U.S. asset management industry's apparent resilience in the last year and a half has temporarily masked serious challenges related to costs, productivity and growth, according to a report released Wednesday by McKinsey & Co.
These challenges call into question some of the industry's assumptions concerning the inevitability of profitable growth, says the report, "Entitled Growth in a Time of Uncertainty: The Asset Management Industry in 2015."
Looking past the return to normal levels of profitability prior to the market declines of third-quarter 2011, the report examines the asset management industry's underlying performance. The top quartile of asset managers earned an average margin of 46% in 2010, approximately 40 percentage points higher than the bottom quartile of the industry, McKinsey reports.
While assets under management in the second quarter of 2011 surpassed pre-crisis highs, industry profit pools remained 15% lower than pre-crisis highs due to escalating costs and pressure on revenue yields. Growth has proven more elusive than profitability, with only one in five asset managers seeing above-average growth in the past decade.
