1、 Getty ImagesGlobal Asset Management Practice The Great Reset:North American asset management in 2022October 2022Global Asset Management Practice The Great Reset:North American asset management in 2022October 2022ContentsIntroduction In the beginning,a position of(apparent)strength 5A turning of the

2、 tide in 2022 11 Industry trends:Change,but much stays the same 14123Where do we go from here?19 Managing uncertainty with an“all-weather”agenda 22 45Global markets hit an inflection point in 2022.A decade of relative calm following the global financial crisisincluding two years of supernormal retur

3、ns after the initial shock of the pandemicgave way to a new reality of supply-side disruptions,geopolitical tensions,and surging inflationary pressures.These factors have triggered a fundamental reset of macroeconomic policy and a fading away of the familiar backdrop of rapidly globalizing trade and

4、 capital flows,lower-for-longer interest rates,expanding central-bank balance sheets,and accommodative fiscal policy(Exhibit 1).As the persistentand,some would argue,secularnature of these shifts became apparent,asset owners and asset managers alike have recalibrated their assumptions about pricing

5、risk across the investable universe.The reset button has been hit for nearly every major asset class.Equities retreated from their historical highs in late 2021,with the S&P 500 declining by 20.6 percent over the first six months of 2022,its worst performance since 1970.Fixed income,once a reliable

6、ballast against market downturns,suffered a 10 percent decline in the same period in the face of inflationary pressuresIntroductionExhibit 1 There was a major reset of macroeconomic conditions in 2022.There was a major reset of macroeconomic conditions in 2022.Real GDP growth,Quarterly%change from p

7、rior periodInfation,12-month%change,consumer indexFederal funds rate,%Federal Reserve total assets,$trillion1Assets projected based on the Feds announced monthly redemption caps to its portfolio of Treasuries and agency mortgage-backed securities.Source:St.Louis Federal Reserve65432086420

8、20055044220200005101520 2022200005101520 20222%average2027Federal Reserve total assetsProjected Fed assets2The Great Reset:North American asset management in 2022by some accounts the worst half-year performance by bonds in over 200 years.The greatest reversals were inflicted on some of th

9、e ostensible winners of the pandemic era:the high-flying technology sector and emerging asset classes,with valuations of some prominent tech unicorns subject to drastic down rounds and cryptocurrency valuations more than halving as investors decided to“get real”with tangible cash flows and hard asse

10、ts.Despite the recent bounce-back in asset prices over the early summer months,significant uncertainty remains.This great reset of macro,market,and policy assumptions has had three major impacts on the North American asset management industry:1.After two years of record growth and profitability,the

11、industry hit a speed bump in its near-term economic trajectory,and significant questions remain as to which elements of its slowdown will be part of a new normal.2.The industrys clientsinstitutional and retail alikeare under pressure as they cope with reopened funding gaps and anemic asset class ret

12、urn forecasts,and they are questioning previously reliable recipes for portfolio construction and long-term investing(Exhibit 2).3.The Great Reset of 2022 has loosened some of the foundational assumptions behind several of the past decades defining trends,including the internationalization of produc

13、ts,clients,and capital sources;rapid growth of risk-on and leverage-oriented business models;and a wave of commoditization borne out of the surging demand for bulk betaassumptions on which the North American asset management industry had built its growth trajectory.What impact will the Great Reset h

14、ave on the structure,performance,and prospects for the North American asset management industry?To answer the question,this report begins by briefly taking stock of the industrys starting positionits performance and health following Exhibit 2 Traditional paradigms of investing have been upended.Trad

15、itional paradigms of investing have been upended.Annualized returns,North America,201721,%1Simple average of mutual funds under the Morningstar Asset Allocation 5070%Equity.2Simple average of mutual funds under the Morningstar Target Date 2030 category.3Simple average of the Morningstar Moderate All

16、ocation Global category.Excludes funds under the 60/40 category.Based on returns for the Endowment Index in US dollars.Created by ETF Model Solutions to replicate the investment strategy of large university endowments.Source:2022 Morningstar.All rights reserved.The information contained herein:(1)ma

17、y not be copied or distributed;and(2)is not warranted to be accurate,complete,or timely.Year-to-date returns,June 2022,%60/40 portfolioTarget date fundsBalanced fundsEndowment model10.210.68.610.215.216.314.219.23The Great Reset:North American asset management in 2022two highly unusual pandemic-era

18、years.We note that the experience of those years has created both opportunity and vulnerability.We then explore how the secular shifts of 2022 have affected the industry to date,as well as the impact they are likely to have on a set of familiar industry trends that have been playing out over the pas

19、t decade.The early summer months brought a reprieve in the markets,but continued macroeconomic volatility creates new demands on asset managers for enhanced resilience and accelerated reinvention.In that spirit,we lay out an“all-weather”agenda for managers seeking to reposition themselves to thrive

20、through the uncertainty of the years ahead.Pooneh BaghaiSenior Partner,Toronto McKinsey&CompanyJu-Hon KwekSenior Partner,New York McKinsey&CompanyPhilipp KochSenior Partner,New York McKinsey&CompanyAndrew GerbaAssociate Partner,New York McKinsey&Company4The Great Reset:North American asset managemen

21、t in 2022In the beginning,a position of(apparent)strengthThe industrys revenue pool grew to$526 billion,more than doubling in size from ten years ago(Exhibit 3).Growth to these new heights was supported by 2021 net flows of$4.8 trillion,representing organic growth of 4.3 percenta record high for the

22、 decade in both absolute and relative termsand$9.8 trillion of asset growth,reflecting the 2021 surge in equity and bond markets.The industrys stellar performance was consistent across all major regions,with record highs in AUM,revenues,and profitability across North America,Western Europe,and AsiaP

23、acific.Largely because of the momentum in its capital markets,North America led the pack with 14 percent growth in AUM,16 percent growth in revenues,and an improvement in operating margins of about 400 basis points(Exhibit 4).The robust performance of the North American industry as a whole masks con

24、siderable dispersion in the performance of individual asset managers.The rising tide of the markets and the flood of new money did not lift all boats,or at least it did not lift them equally.Continuing a trend we have tracked over the past few years,the gap between the best and the rest continued to

25、 widen considerably.Nowhere was this The asset management industry entered 2022 in a position of unusual strength.With the robust market appreciation and net flows from the year prior,the global industry hit a high-water mark of$126 trillion of assets under management(AUM),a figure representing 28 p

26、ercent of global financial assets,up from 23 percent a decade ago.In the beginning,a position of(apparent)strength5Exhibit 3The asset management industry entered 2022 in a strong position.Global 3rd-party managed assets,year-end,$trillionIncludes 42 countries in North America,Latin America,Western E

27、urope,Central&Eastern Europe,AsiaPacifc,Middle East,and Africa.Includes 29 countries,representing 98%of global assets under management.Source:McKinsey Performance Lens Global Growth CubeGlobal industry revenues,$billionNet fowsMarket performance201257.8132.46.1Year-end 2021125.924.443.757.8Net fows,

28、%of beginning-of-year AUM14 4.0 5.7153.72.8163.05.5173.410.0182.3 0.8193.313.1203.311.120214.314.6248526201220216In the beginning,a position of(apparent)strengthclearer than in revenue growth:Asset managers in the top quartile outperformed their peers in the bottom quartile by 29 percentage points,r

29、elative to gaps of 19 to 20 percentage points in the last two years.While profitability improved for the asset management industry overall,the gap between the best and rest remained considerable,with a 37-percentage-point difference between top-and bottom-quartile performers(Exhibit 5).The unprecede

30、nted growth in industry assets and revenues brought with it a predictable ratcheting up of the industrys cost base.Over the course of 2021,costs of the North American asset management industry grew by$13 billion,reaching a new high of$167 billion(Exhibit 6).This increase,representing an annualized g

31、rowth rate of 8 percent,was just over half the overall rate of the industrys asset growth,but it was almost double the industrys rate of organic growth.Categories that contributed most to 2021s cost increase were investment management(up$7 billion),technology($2 billion),operations($1 billion),and l

32、egal and compliance($1 billion).In relative terms,growth in spending on distribution remained relatively muted(3 percent),in part because of natural efficiencies created by pandemic-induced remote sales.An expanding industry cost base is a naturaland perhaps inevitablecorollary to a steadily growing

33、 base of industry assets.The conditions for steady asset growth have certainly been in place in North America,with its accommodative economic environment of the past decade.But the volatility of the first half of 2022 serves as a reminder that growth cannot be taken for granted,and the continued unc

34、ertainty in the macroeconomic environment raises a natural question:How much of that cost base can be supported in an era of more tepid Exhibit 4Growth was robust across all regions in 2021.Growth was robust across all regions in 2021.Global AUM(including alternatives),201221Includes 25 countries2 i

35、n North America,12 in Western Europe,and 11 in AsiaPacifcrepresenting 95%of global assets under management.Revenues based on management fees;excludes impact of performance fees and carried interest.Source:McKinsey Performance Lens Global AM Survey;McKinsey Performance Lens Global Growth CubeNorth Am

36、ericaWestern EuropeAsiaPacifcAverageAUM,$trillionAveragerevenuepools,$billionProftmargin,%244245525966290939803424237373740202022021+14%+10%+14%+16%+13%+20%7In the beginning,a position of(apparent)stre

37、ngthExhibit 6Industry costs have been steadily increasing.Total North American asset manager spend by function(estimate),201221,$billionFigures may not sum to 100%,because of rounding.Source:McKinsey Performance Lens Global Asset Management SurveyOverhead,otherManagement/administrationLegal,risk,com

38、plianceTechnologyOperationsDistributionInvestment managementCAGR,201220%CAGR,202022%68665020693892091411512 20937546420212171615Cost/average AUMbasis pointsExhibit 5 The gap between the best and the re

39、st has widened since 2019.Performance comparison of North American asset managers by quartile,201921Diferences indicated in each graph compare the top-quartile asset managers vs those in the bottom quartile,measured in percentage points(pp).Source:McKinsey Performance Lens Global Benchmarking Survey

40、Revenue growth,%Operating margin,%of revenuesLong-term net fows,%of beginng-of-year AUMTop quartileAverageBottom quartile202351637 pp39 pp30 pp13 pp21 pp19 pp29 pp19 pp20 pp5034395176212388In the beginning,a position of(apparent)strengthgrowth?The asset management in

41、dustrys costs have been variable on the upside,but exactly how flexible will these costs prove to be on the downside?Answering these questions requires a look at the evolution of the industrys cost base over the course of the full economic cycle.In the past decade,costs in North America have grown b

42、y$71 billion(Exhibit 7).The industry has indeed generated some degree of positive operating leverage:In 2021,managing a dollar of AUM cost 28 basis points in North America,a slight reduction from the rate of 31 basis points in 2017 but perhaps not to a degree that one would expect when two-thirds of

43、 the growth of the industrys asset base has resulted from market appreciation.In the last ten years,the industrys cost base has grown at about 6 to 7 percent per year,double the organic growth of assets in the industry.Disaggregating the sources of historical cost growth is instructive for understan

44、ding the industrys ability to manage through a more protracted downturn.Our analysis of cost data over the past ten years reveals a challenging reality of the growing cost of complexity in asset management business models.As investors have sought and asset managers have provided more complex solutio

45、nsproduct and vehicle innovation,usage of data and analytics,digital sales enablement,next-generation operating platformscompanies have a growing need for more,and more skilled,talent.In fact,nearly 70 percent of all cost increases for the industry over the last decade have been directly related to

46、talent:Almost half of all cost growth was driven by increases in compensation(fixed and variable),and nearly an additional quarter of all cost growth resulted from increased head count.While asset managers have continued to invest in technology and seek greater scalability and efficiency in their op

47、erating models,the reality is that with greater business complexity has Exhibit 7 Over the past decade,industry costs have increased by$71 billion.Over the past decade,industry costs have increased by$71 billion.Cost increases by function and type of increase,North America,201221,$billionSource:McKi

48、nsey Performance Lens Global Asset Management SurveyHead count Fixed compensationVariable compensationOther thanInvestment managementManagement/adminstrationTechnologySales and marketingOther/overheadOperations28121196531%4%20%33%100%25%21%40%13%4%63%33%24%33%15%27%40%30%9%36%7122%22%25%31%Total9In

49、the beginning,a position of(apparent)strengthcome growing cost of talent,in terms of both volume and price,and often in areas where costs are fixed in the near term.Among the largest areas of cost growth,four stand out:Investment management represents$28 billion(or 39 percent)of industry cost growth

50、,with close to a third related to increases in investment professional head count as the industry innovated with productswhich require new teams and capabilitiesand responded to client demands for an ever-broader range of specialized investment strategies.And despite the industrys focus on automatio

51、n,data enablement,and scalability,costs of the investment management function especially have continued to rise in line with market performance.Management and administration are responsible for$12 billion(17 percent)of industry cost growth.These costs reflect the emergence of a new class of senior p

52、rofessional managers and business leaders who are required to lead increasingly scaled firms in an era of significant growth and greater complexity.While some of the increased management and administration costs are related to third-party spendfor example,finance outsourcing and third-party legala t

53、remendous amount of the cost growth has resulted from compensation increases as this now well-established professional managerial class has become more senior.Technology represents$11 billion(15 percent)of the industrys cost growth,with a majority coming from non-compensation expensesa mix of new sy

54、stems and software spend required to support a more complex array of investment capabilities,growth in maintenance costs of supporting legacy systems,and early investments in digitizing their operating platforms.Technology investments are not simply one-time costs but instead are becoming a continuo

55、us and meaningful portion of the cost of operating a successful asset manager.Sales and marketing contribute$9 billion(13 percent)to industry cost growth.This function is whereon a relative basisexpansion of head count had the greatest impact on spending.Sales teams have been ramped up in size to ca

56、pture robust growth of the past decade and to deliver on the more specialized and consultative requirements of sophisticated clients.Furthermore,given how robust gross sales have been over the past few years,increases in variable compensation have been a significant source of cost growth in the sale

57、s and marketing function.The growth in the size and complexityand the potentially increased rigidityof the industrys cost base represents a key vulnerability for North American asset managers.With the cushion of consistent asset growth over the past decade,operating models have grown in complexity,a

58、nd cost structures have ossified.10In the beginning,a position of(apparent)strengthA turning of the tide in 2022 Against the foregoing picture of relative strength,the market disruptions of 2022 caused a radical shift in the industrys net flow dynamics.After an uninterrupted string of robust monthly

59、 inflows throughout 2021(a minimum of$59 billion per month),uncertainty and volatility of markets in early 2022 caused a sharp reversal in the second quarter(Exhibit 8).In contrast to the record wave of$1.6 trillion in new money that rushed in for 2021,the first half of 2022 saw outflows of$281 bill

60、ion.Exhibit 8Market dislocations in 2022 have led to a broad-based pullback by investors.Long-term open-end fund fows,North America,$billionIncludes open-end mutual funds,exchange-traded funds(ETFs).Excludes funds of funds.Source:2022 Morningstar.All rights reserved.The information contained herein:

61、(1)may not be copied or distributed;and(2)is not warranted to be accurate,complete,or timely.Annual and frst-half totals by asset class,North America,$billionMoney market open-end fund fows,North America,$billion778578798JanFebMarAprM

62、ay June July Aug Sept OctNovDecJanFebMarAprMay June202488511,640812021H1 2022EquityFixed incomeMoney marketOthersA turning of the tide in 202211Perhaps most notable in this reversal was the demand trajectory for fixed income,which was a highly reliable generator of positive flo

63、ws over the last decade.In the first half of the year,$170 billion of fixed-income open-end fund assets came off the table as the weight of inflation and interest rate increases punished the returns of this asset class.Equities managed to eke out modest organic growth($79 billion inflows)on the basi

64、s of rebalancing trades.Patterns of demand also shifted within each asset class category.In fixed income,flows accrued to short-duration strategies,floating-rate strategies like bank loans,and inflation-protected ones(for example,TIPS and I bonds)with risk-on strategies(such as high yield),while lon

65、g-duration products suffered capital flight.Within equities,domestic and value-oriented strategies benefited at the expense of emerging markets and growth-oriented strategies.This sharp and sudden turning of the tide affected all asset managers through a re-marking of industry assets.In the first ha

66、lf of 2022,the value of US-domiciled equities and bond funds fell by almost$5 trillion.However,in the face of industry-wide pressure,there was significant variance in how the organic growth of individual asset managers was affected by the sudden shift in the environment.Over the past year,four clear

67、 segments emerged(Exhibit 9):Exhibit 9 There was a changing of the guard in 2022.Open-end fund managers net fows,North AmericaIncludes mutual funds,money market funds,and exchange-traded funds(ETFs).Excludes funds of funds.Sample of 700 fund families listed on Morningstar.Source:Source:2022 Mornings

68、tar.All rights reserved.The information contained herein:(1)may not be copied or distributed;and(2)is not warranted to be accurate,complete or timely;McKinsey analysis2021 fows,$billion H1 2020 fows,$billionNet outfowsNet infowsNet infowsReboundersMidsize to small managers with a value tiltYTD 2022:

69、27 net infows11%of frms Bump in the roadLarge fxed-income managers with exposures to infation-sensitive strategiesYTD 2022:352 net outfows 26%of frmsConsistent winnersFirms in the passive space with precision exposures and proprietary distributionYTD 2022:258 net infows35%of frmsChallengedActive man

70、agers in low-performing,traditional strategiesYTD 2022:222 net outfows28%of frmsNet outfows12A turning of the tide in 2022 Consistent winners.An impressive 35 percent of firms were able to build on the positive flow momentum they had in 2021 and extend this to continued organic growth in the first h

71、alf of 2022.This group collectively captured$258 billion in net flows,a majority of which was captured by large,diversified firms that had the breadth of offerings to seamlessly meet new sets of client needs,passive firms that drew assets from rebalancing and tactical repositioning trades,and firms

72、that had the benefit of proprietary distribution channels.Bump in the road.Given the sudden shift in macro environment,it is unsurprising that a meaningful number of firms that were in growth mode for 2021(26 percent of firms,to be precise)gave up some of their gains in 2022.As of mid-2022,this grou

73、p had yielded$352 billion of outflows,equal to more than half their gains from the prior year.This group includes some prominent names in fixed income whose investment performance suffered with the sudden shift in the macro environment.Also in this group are asset managers whose prior growth was hea

74、vily focused on strategies that fell out of favor in the first half of 2022for example,growth equities,long-duration fixed income,and emerging markets strategies.Rebounders.The share of firms that were able to take advantage of the shifting tide and rebound from a previous position of outflows is re

75、latively small:just 11 percent of asset managers.The collective net flows for this group for the first half of 2022 was a relatively modest$27 billion.Firms in this category include asset managers whose investment strategies skewed in favor of value-investing factors,which the macro conditions of 20

76、22 brought back into favor with clients.Consistently challenged.The final group of asset managers,some 28 percent of the industry,suffered from outflows throughout 2021 and the first half of 2022.This group largely consists of asset managers who were facing challenges in the investment performance o

77、f their flagship strategies.Managers who operated primarily in traditional product categories with low performance dispersion are heavily represented here.Outflows in this group accelerated meaningfully from$196 billion for the full year of 2021 to$222 billion for the first half of 2022.The capital

78、markets appear to have priced in both the more muted view of industry growth and the dispersion of individual managers performance.In mid-2022,the average forward P/E ratios of publicly listed asset managers in North America declined to 1012 times,some 50 percent below their level in 201018.However,

79、top-quartile performers continued to trade at a significant and consistent premium to the industry average,trading with multiples in the range of 1520 times,in line with their publicly listed alternative asset management peers.13A turning of the tide in 2022Industry trends:Change,but much stays the

80、sameHow have dislocations in the market affected the well-established secular trends that have been reshaping the industry over the past decade?The answer,somewhat counterintuitively,is that the trends have not changed a lot.The most prominent trendseach of which we have discussed in reports from pr

81、evious yearshave shifted in texture but not in their fun-damental direction of travel.Active management under pressureMuch has been written on the challenges faced by actively managed funds in the North American market over the past decade.Some writers have attributed active equities underperformanc

82、e to the high-beta and low-dispersion market conditions of the past decade,arguing that a major shift in market regime would be the catalyst for a broad-based comeback of active management.This story has not quite played out in the shifts of 2022,with roughly 55 percent of active equity managers und

83、erperforming their benchmarks,identical to their performance in 2021(Exhibit 10).Clients have continued to vote with their feet:active equities experienced$130 billion of outflows in the first half of the year.In a further challenge to the industry,low performance extended to the world of fixed inco

84、me,with 70 percent of assets underperforming in the first half of 2022.Exhibit 10 Active managers investment performance remains under pressure.Active funds performance by asset class,201922,North America,%of fundsYear-to-date(YTD)results as of June 2022.Percentage of actively managed mutual funds o

85、utperforming primary prospectus benchmark.Analysis was done at the individual share class level and grouped into Morningstar Global Broad Categories.Based on the%of actively managed assets under management outperforming primary prospectus benchmark.Source:2022 Morningstar.All rights reserved.The inf

86、ormation contained herein:(1)may not be copied or distributed;and(2)is not warranted to be accurate,complete,or timely;Morningstar Active-Passive Barometer 2020EquitiesFixed incomeMulti-asset50%ofAUM48524545434658304046354620192021YTD 202220192021YTD 202220192021YTD 2022594635445960782937502854 18%9

87、 out of 1022%Total model portfolio assets as of year-end 2021Average annual growth over the past 5 yearsRest of worldUSGlobal share of advisors using model portfolios Growth rate of third-party model portfolios from June 2021 to Mar 2022 968Mar 201718192021Mar 20221,1571,2471,3551,6971,8634605826046

88、5182479413%12%14%1,4281,7391,8512,0062,5212,657CAGR18Industry trends:Change,but much stays the same Where do we go from here?Current macroeconomic volatility generates significant industry uncer-tainty.Central banks around the world have begun an accelerated rever-sal of COVID-related monetary stimu

89、lus,and these actions will invariably bring a deceleration of economic growth.However,we do not know what pace,magnitude,and duration of monetary tightening will be required to curb inflation,what type of landing the real economy will suffer as growth slows,and where the wild card of geopolitics wil

90、l drive commodity prices and supply chains.To understand the longer-range impact of the Great Reset on the North American asset management industry,we have outlined three scenarios,each grounded in a historical analogy,to illustrate how the performance and health of the industry would be affected un

91、der different interest rates,inflation rates,and AUM growth rates(Exhibit 15).These scenarios are not meant as predictions per se but as examples to aid strategic planning in an environment of extreme uncertainty.Exhibit 15 Three potential scenarios for the industry based on historical analogies.Thr

92、ee potential scenarios for the industry based on historical analogies.Forecast,annualized through year-end 2026,North AmericaAUM growth,CAGR,%Average annual net fow,%Revenues,CAGR,%EquitiesFixed incomeMoney marketAlternativesScenarioSoft landing712%25%510%05%70%30%11%30%50%StagnationStagfationThe th

93、ree scenarios are grounded in historical analogies,to illustrate how the performance and health of the industry would be afected under diferent interest rates,infation rates,and AUM growth rates.These scenarios are not meant as predictions but as tools for strategic planning in an environment of ext

94、reme uncertainty.Source:McKinsey Asset Management Practice;McKinsey Performance LensWhere do we go from here?19Scenario 1:Soft landingIn a soft landing,central banks are able to thread the needle in taming inflation while avoiding a prolonged downturn in economic growth.This scenario approximates th

95、e experience of the United States in the early 1990s,when a bout of monetary tightening was applied to a healthy economy,leading to a short-lived downturn followed by a rapid and extended bounce-back in growth.In this scenario,inflationary expectations remain tamed,and supply chain disruptions gradu

96、ally normalize in the face of geopolitical tensions that are contained.Predictably,the impact of this scenario leans positive.A stabilization of inflationary expectations and brisk economic recovery set the stage for a return to structurally low(er)rates,and thus for a reversion to a risk-on market

97、environment with a steady flow of new capital.More stable geopolitical conditions enable growth of global trade and capital flows,widening international channels of growth for North American asset managers.In this scenario,we expect organic growth of the industry to return to an average of 2 to 5 pe

98、rcent per year through 2026,with annualized revenue growth in the range of 5 to 10 percent,similar to the industrys prepandemic trend.Key beneficiaries in this flow environment include equities and growth-oriented alternative strategies,such as private equity and venture capital.Fixed income faces p

99、otential outflows in the earlier years(in response to initial monetary tightening)and a rotation of demand into rate-agnostic sensitive categoriesfor example,floating rate and alternative credit.Scenario 2:StagnationThe stagnation scenario involves aggressive tightening of monetary policy that succe

100、eds in curbing inflation at the cost of a more protracted economic slowdown,which in turn requires a return to looser monetary conditions.These conditions are reinforced by secular trends of an aging population,which slows demand and drives down rates.Additionally,stalled globalization in capital ma

101、rkets mutes cross-border capital inflows.In effect,in this scenario,monetary policy overcorrects,likely curbing inflation but leading to a protracted slowdown in economic growth that might ultimately require additional fiscal stimulus to rebound.The closest historical analogy is Japan in the 1990s,a

102、 period known as the Lost Decade.Japan at that time had experienced a nearly ten-year run-up of strong economic and capital market growth,but in the early 1990s,interest rates expanded from 2.5 percent to 6 percent,and asset valuations plummeted.The Nikkei,for example,fell by almost 70 percent over

103、the ensuing decade.While policy makers quickly responded by lowering rates to near 0 percent,the country could not sustain the economic growth of the 1980s;instead,GDP growth averaged 1 percent annually with side effects of workforce wage depression creeping in throughout the 1990s.In this environme

104、nt,we expect low to no organic growth and a strong rotation toward income-and yield-generating assets.Private-market alternatives(particularly real assets)continue to be in high demand in this scenario,as investors seek to tap idiosyncratic risk and liquidity as a source of return enhancement in the

105、 face of depressed public-market valuations.In a stagnation scenario,money market funds would capture more than their fair share of flows as capital remains on the sidelines and investors seek yield over and above what is available from deposits.Multi-asset strategies could also benefit as investors

106、 seek to outsource asset allocation and look for creative sources of yield.20Where do we go from here?Scenario 3:StagflationThe final scenario,stagflation,describes a world where inflationary expectations remain stubbornly above central banks targets,reinforced by continued geopolitical tensions and

107、 their impact on commodity prices and supply chains.These conditions require central banks to continue ratcheting up interest rates over an extended period,resulting in slow-to-negative economic growth.The closest historical analogy here is the United States in the 1970s,when a confluence of factors

108、,including a supply shock from the OPEC embargo,high budget deficits,and negative real interest rates,resulted in a boom in commodities prices,a spike in inflation that exceeded 10 percent,and unemployment levels that doubled to over 9 percent.In this scenario,inflation remains stubborn,and high int

109、erest rates induce a sustained multiyear recession and significant downward pressure on the valuations of risky assets,leading to a protracted period of industry outflows,to the tune of 2 to 3 percent per year.A combination of depressed markets and outflows has a large effect on revenue pools:a 10 t

110、o 15 percent decline over the ensuing three to five years.However,the velocity of the decline in revenues would be somewhat offset by a rise in demand for higher-fee alternative strategies like commodities,real assets,and private markets.The impact of such a scenario on asset managers would likely r

111、esult in a period of restructuring and consolidation within the industry.21Where do we go from here?Managing uncertainty with an all-weather agendaGiven the potential industry scenarios,any of which carries a strong likelihood of volatility,how should asset managers seek to position them-selves if t

112、hey want to thrive amid an extended period of uncertainty?Our answer involves building an all-weather asset management platform that combines the attributes of flexibility,stability,and scalabilityqualities required to deepen client relevance,deliver distinctive investment value,and grow with a high

113、 degree of operating leverage.Each asset managers all-weather blueprint will be unique,but each will have a similar set of core building blocks(Exhibit 16).Exhibit 16 Building the all-weather asset manager.Source:McKinsey Asset Management PracticeStrategic client partnershipsPlatform engagementCusto

114、mer successAccount planning Diversifed alpha Alternative beta Thematic investing Efcient vehicles Tactical overlays Single source of truth on data Streamlined technology chassis Analytics-enabled business processes End-to-end automation Patient/permanent capital pools Zero-based capital reallocation

115、 Agility through M&As,joint ventures,and partnershipsComponentsScalable operating platformFlexible capital Infation protection Income and yield Downside protection Liquidity Sustainability(eg,net-zero emissions)Model portfolios Values-based investing Tax efciency Digital tools Monitoring and managem

116、entPortfolio solutionsCustomizationManaging uncertainty with an all-weather agenda22In the near term,we recommend a six-point agenda for North American asset managers to follow as they navigate the extreme uncertainty that lies ahead in the next 12 months:1.Strategic client engagement.Market disloca

117、tions open a unique window of opportunity for deepening client relationships and positioning a firm as partner rather than provider.This opportunity requires new levels of discipline in strategic account planning and proactive outreach to a firms top clients.2.Future-proofing the investment and prod

118、uct platform.The Great Reset has created a volatile brew of market conditions that are new even to seasoned investors.To adapt to this new reality,investment teams will need to recalibrate their investment processes and approaches to risk management.Market dislocations also create opportunities for

119、innovationin particular,building the next generation of solutions targeted at new client needs,such as inflation protection,portfolio diversification,and liability management.3.Next-generation distribution.Successful client engagement amid the uncertainty of 2022 requires the ability to move with bo

120、th pace and scale.This is where new approaches to distributionhybrid sales practices powered by technology,team-based client engagement models that deliver expertise,and data-and digital-driven sales enablement that facilitates both targeting and customizationwill pay dividends.The disruption in tal

121、ent markets,especially in the technology sector,creates opportunities for bringing in new types of talent,particularly in digital distribution.4.Resource reallocation.Asset managers who strengthened their competitive positions in previous downturns typically embraced a through-the-cycle approach to

122、investing in strategic growth priorities.The current environment requires a zero-based approach to resource allocation that re-underwrites and ring-fences growth investments and reins in the undisciplined pursuit of more.5.Boldness on structural costs.Disciplined cost management is an inevitable par

123、t of resilience planning and a key lever for creating the degrees of freedom required to take advantage of dislocations created by a rapidly changing external environment.Near-term cost controls are important but can only go so far.Asset managers willing to take a bolder approach to structural costs

124、one that involves a more fundamental reengineering of their operating models,often enabled by technologywill be able to unlock a far deeper pool of resources while building enhanced scalability that will serve as a source of advantage in a recovery.6.Repositioning of the franchise.Asset managers wil

125、l need to maintain,if not accelerate,the repositioning of their franchises to benefit from the major industry trends that remain consistent amid the Great Resetsuch as those toward private markets,new vehicles,and portfolio solutions.Uncertain environments typically unlock new possibilities for oppo

126、rtunistic M&A,talent/team lift-outs,and partnerships that can help accelerate these critical transformations.23Managing uncertainty with an all-weather agendaThe Great Reset is shifting the foundational macroeconomic assumptions of the last decadeeffectively a phase shift in the rules that have unde

127、rpinned the business of asset management over the past decade.These fundamental shifts will require more rapid restructuring and reinvention of North American asset management and could lead to radical shifts in the competitive landscape.But in times of significant change,opportunity abounds.Clients

128、 are facing once-in-a-generation challenges and are looking for true asset partnersnot merely providersto help them navigate the uncertain times ahead.Copyright 2022 McKinsey&Company.All rights reserved.Pooneh Baghai is a senior partner in McKinseys Toronto office,Andrew Gerba is an associate partne

129、r in the Summit office,and Phillip Koch and Ju-Hon Kwek are senior partners in the New York office.The authors wish to thank Carlos Beltran,Edgardo Bonilla,Kevin Cho,Manraj Singh Dhillon,Victoria Nguyen,Sebastian Patino,Raksha Pant Tuladhar,and Henri Torbey for their contributions to this report.24Managing uncertainty with an all-weather agendaOctober 2022 Copyright McKinsey&C McKinsey McKinsey