1、Cost and Growth in Asset ManagementBenchmarking analysis and implications for asset managersDecember 2022Strategy&Executive summaryIn our sample of 461)asset managers,AuM grew by 20%from 2019 to 2021,while profits increased by a staggering 22%.Smaller asset managers with active business models and i

2、nvested largely in equities remained among the most profitable,despite significantly higher costs per AuM.But larger asset managers with AuM of more than USD 1tn were also able to achieve a comparably high level of profitability with active AM business models.Overall,the average CIR improved signifi

3、cantly from 65%to 61%despite a further increase in OpEx per AuM(26.4 to 27.5 bps per AuM).The latter was more than made up for by strong revenue growth.However,a select review of the half-year numbers of 10 asset managers reveals that the phenomenal growth of AuM,revenue and profitability in 2021 ha

4、s been reversed,reflecting the drop in stock market valuations:AuM growth has gone from 16%to-9%;OpEx per AuM has increased by 22%;and profitability has fallen by 6%.Given continued global uncertainty and talk of recession,we recommend focusing on“good”costs,i.e.,supporting differentiating capabilit

5、ies,while cutting“bad”costs,i.e.,supporting non-essential capabilities.1)46 Asset Managers in sample with AuM reported at least for 2012,2019-2021December 20222Strategy&State StreetBlackRockSociete GeneraleFidelity136(62%)1.422(173%)Natixis AMCapital GroupVanguardMEAGDekaBankAllianzJ.P.Morgan AM1.91

6、6(163%)NuveenBNY Mellon1.490(241%)SchrodersAmundiDWSPrudential FinancialT.RoweGoldman Sachs AMInvescoNorthern Trust1.069(122%)2.296(164%)Wellington ManagementUBS AM732(180%)AxaBNP3.973(211%)Credit Suisse AM462(81%)UnionInvestmentAviva InvestorsGAMSwiss Life AMVontobelTalanx GroupPartnersGroup8.838(2

7、08%)6.445(298%)3.653(131%)2.748(158%)2.609(70%)2.149(104%)1.538(63%)1.518(170%)1.419(147%)1.245(88%)1.236(115%)319(-17%)537(33%)1.059(704%)178(67%)887(60%)454(138%)267(100%)395(151%)138(70%)344(47%)123(421%)97(1%)928(53%)US market leaders continue their growth story few others able to keep paceGrowt

8、h of largest and selected AMs(2012 to 2017 to 2021 in bn)1)Additional AuM from 2012 to 2017;2)Additional AuM from 2017 to 2021;Source:Company reports 2021;Strategy&analysis December 20223AuM 2012 in bnAuM 20171)in bnAuM 20212)in bn(+/-Growth)Insurance AMAs market leaders,BlackRock and Vanguard have

9、been in a class of their own in terms of both size and growthOverall,US asset managers have grown significantly faster on average than their European counterpartsInsightsStrategy&Highly profitableAverage profitableBelow average profitable1.22.613.60.80.01.80.22.02.42.23.21.63.22.81.03.03.43.68.90.80

10、.00.41.60.62.01.42.42.80.41.2Total AuM(in bn)Profit per bn AuM(in mn)AM enjoyed favourable year in 2021-AuM growth picked up and profits increased sharply,smaller PE/active AM most profitable2021 Outside-in competitive profit benchmarking1)December 20224Mid scaleLarge scaleAvg.profitability 2020 and

11、 20212)Avg.AuM2020 and 20212)PassiveActivePredominantly managed:Smallscale In comparison with our 2020 sample study of asset managers:AuM grew by 18.5%vs.MSCI World:22.4%(6.6%vs.15.9%in 2020)Profit increased by 22%on average(by 0.47m per bn AuM)(-14%in 2020)Almost all AMs in our sample were able to

12、increase their profit per AuM,a very different result to last years study The most profitable AMs were mainly small and with active and/or PEtype/private markets business models(all with at least around 50%share of equities in the portfolio)Insights1)Sample of 28 Asset Managers with 2021 figures 2)F

13、or sample included in 2020 study;Source:Company reports 2021;Strategy&analysisStrategy&Significant increases in revenue helped asset managers to achieve a further reduction in their CIR despite(on average)rising operating costs Half of asset managers kept up the cost discipline from the previous yea

14、r and reduced OpEx per AuM(by 1.7bps),while the OpEx per AuM of the remaining half increased by 5.1bps The group of asset managers with thehighest cost increases are smaller firms with active investment management models Most of this group nevertheless generate a high income and operate profitably w

15、ith high costs and low CIR However,cost reductions may be necessary,as revenue growth might slow due to global uncertaintySoaring revenues more than made up for rising expenses half of asset managers maintained cost discipline2021 Outside-in competitive cost benchmarking1)December 20225PassiveActive

16、Predominantly managed:Size of bubble:small(AuM 250bn),mid(250bn AuM 1,000bn),large(AuM 1,000bn)10%20%30%40%50%60%70%80%90%100%110%08438284456326048646872762452Operating Expenses to AuM(in bps)Avg.OpEx to AuM2020 and 20212)Avg.CIR 2020 and 20212)Increase incomeIncrease income and efficienc

17、yIncrease efficiency or maintain positionMaintain positionCIR(in%)Insights1)Sample of 28 Asset Managers with 2021 figures;2)For sample included in 2020 studySource:Company reports 2021;Strategy&analysisStrategy&Falling stock markets and rising interest rates haveput pressure on asset manager valuati

18、onsDevelopment of asset manager valuations1)Period covers time span between 1 Jan 2021 and 27 September 2022Source:Bloomberg,Strategy&analysisDecember 202261-Jan-211-Apr-211-Jul-221-Jul-212.0%1-Jan-221-Oct-211-Apr-221-Oct-22-20%-10%0%10%20%30%40%50%-1.0%0.0%1.0%3.0%Index changeCentral bank ratesDow

19、Jones Industrial Average vs.US Asset Managers Index and central bank rates-21.8%Dow Jones Industrial Averagesince January 20211)-9.4%Dow Jones US Asset Mgrs.Indexsince January 20211)Comments The Dow Jones IndustrialAverage index has fallen by 21.8%since January 2021 During the same period,US assetma

20、nagers have on average lost 9.4%of their market capitalizations In light of persistently high inflation rates,central banks have instituted a global interest rate reversal(e.g.Fed raised the base rate to 3.25%in September 2022)The major drivers for the decrease in asset manager valuation are challen

21、ges to profitability due to reduced fee-based income as overall markets decline,as well as rising interest rates With further rising interest rates and decreasing overall market valuations,it is likely that asset manager valuation will remain under pressureDow Jones Industrial AverageDow Jones US As

22、set Managers IndexEuro STOXX 600FED rateECB rateDow Jones US Asset Managers IndexDow Jones Industrial AverageEuro STOXX 600Strategy&-22%22%16%-9%HY 20222021AuM and asset manager profitability have already been heavily affected in the first half of 2022HY 2022 trendDecember 20227(AuM growth in%)Reduc

23、ed asset prices have put cost discipline back on the agenda,after it had ceased to be the focus of many asset managers during the period of persistent asset price increases in recent years-25%p2021HY 202265.0%58.0%+7%pHY 2022202110.910.3-6%AuM Growth(Profit per BN AuM in MN)Profit per AuM(Cost-Incom

24、e-Ratio in%)CIR2021HY 202213.516.4(OpEx per AuM in BPS)+22%Operating ExpensesMSCI Worldgrowth1)Sample of 10 Asset ManagersSource:HY reports,Strategy&analysis Strategy&With the increase of OpEx per AuM accelerating further,profit increases from 2021 are melting away2022 trend benchmarking Source:Stra

25、tegy&analysisDecember 20228Declining profits and AuMTrend outside-in competitive profit benchmarkingTrend outside-in competitive cost benchmarking trendIncreasing OpEx per AuM lead to increased CIRTo maintain profitability,support growth within differentiating capabilities and cut costs for non-esse

26、ntial capabilitiesStrategy&In order to counteract pressure on profitability,asset managers need to focus on realigning their cost structureStrategic considerations for asset managersDecember 20229Capitalize on high-growth areas to counteract declining AuM growthStatus quoMeasures to counteract press

27、ure on asset manager profitabilityStatus quoTop-line growth accelerationSource:Strategy&Improve OpEX/AuM and strengthen differentiating capabilitiesBottom-line optimizationAchieve higher share of wallet with existing partners by e.g.extending service portfolioAccomplish integration into open platfor

28、ms to increase reach of product offeringTarget high-growth areas(e.g.equity offerings and APAC region)Product and distributionstrategy reviewProtect“good”costs that help to differentiate capabilities(e.g.digital innovation,etc.)Reduce or eliminate“bad”costs(e.g.non-performing sales channels,etc.)Aim

29、 for best-in class cost levels in non-differentiating capabilities(e.g.Finance,Back-office support,etc.)Cost structurerealignmentBenchmark current organizational size and potentially restructureEnsure org.flexibility and prepare cost base for external shocks(pandemics,wars,etc.)Identify JV/M&A oppor

30、tunities to leverage cost synergies and increase scale effects Organizationalrightsizing and M&ALooming recession riskIncreasing salaries and inflationDecreasing AuMgrowthFurther pressure on OpEx/AuMStagnating/increasing OpExAsset manager profits are decliningRevenue pressureCostpressureStrategy&Lac

31、k of scale can only be partially tackled by consolidation,but further potential for cost reduction lies in outsourcing non-core activitiesDeep dive:OutsourcingSmaller and mid-sized asset managers lack the scale to address cost pressure on their own this can only be partially rectified through consol

32、idation and cooperationOutsourcing of select functions along the value chain(i.e.,primarily non-differentiating middle and back-office activities)to specialists offers additional potential for cost reductionThis opportunity is reflected by a growing trend in recent years,with large asset servicing p

33、roviders extending the scope of their service platforms:BlackRock reinforced the market leading positioning of its Aladdin software State Street created Alpha,building on its acquisition of Charles River Development BNP Paribas,through selected partnerships,is shaping a best-of-breed solutionKey cha

34、llenges that asset managers often need to address include:Legacy IT that lacks the flexibility to integrate services Standardization of processes to allow leveraging of synergiesDecember 202210Situation and challengeOpportunitiesAsset management value chainInv.mgmt.&report.Depot managementDepot open

35、ingInvestment reportingFund reportingStatutory and tax reportingReportingIndividual reportingPerfor-mancePerformance reportingPerformance attribution Performance analysisInvest-mentCredit risk analysis&reportingMarket risk analysis&reportingFund controllingReconciliationInvestment complianceOrder ch

36、eckMarket conformity checkOrdersTradingStructuringPort-folio mgmt.Fund executionFund constructionRe-searchMicro researchMacro researchFund accountingFund pricingInvestment accountingReconciliationData sourcing SalesAdviceTransactionClient acquisitionquant.modelsQuant.modelingProduct strategyNew prod

37、uct processPro-ductAsset alloc.Target AllocationRebalancingCore activitiesNon-core activities Middle and Back Office as a service cost-efficienthandling of non-differentiating activitiesValue-added data analytics/AI-based capabilities that allow additional differentiation and alpha at reasonable cos

38、tsDistri-butionProd.devel.Front OfficeMiddle OfficeBack OfficeSource:Strategy&Strategy&11Your Strategy&contactsDecember 2022Dr.Philipp WackerbeckPartner Global Head of Financial Services+49 170 2238 Dr.Utz HelmuthManaging Director Head Asset Management GSA+41 77 409 Martin RietzelSenior ManagerFinan

39、cial Services+49 160 2254 Marc PeiterManagerFinancial Services+49 151 1562 Thank 2022 PwC.All rights reserved.PwC refers to the PwC network and/or one or more of its member firms,each of which is a separate legal entity.Please see for further details.Disclaimer:This content is general information pu

40、rposes only,and should not be used as a substitute for consultation with professional advisors.Strategy&Classification of costs into four categories and investment focus on differentiating capabilitiesCost structuresSource:Strategy&135-10%20-30%Table stakes“Lights-on”Differentiating capabilitiesz45-

41、55%20-30%Misallocation20-40%10-20%035-45%zNot required(Non essential capabilities)Table stakes(Capabilities required by industry dynamics)“Lights-on”(Capabilities required to“keep the lights on”/operate)Differentiating capabilities(Capabilities that build advantage)Typical cost structureOptimal cost

42、 structure5-10%NotrequiredDecember 2022Strategy&Alignment of costs with capabilities needs investments on differentiating“good”costs and elimination of“bad”costsCost structure alignmentSource:Strategy&14Branches(if applicable)Call centerMarketing(Communications)CRM and ExperienceIT build and opsFrau

43、d detection“Lights-on”(Capabilities req.to“keep the lights on”/operate)Not required(Non essential capabilities)zNon-performing sales channelsDiscretionary projectsLong-tail brand portfolioNon-core marketing activitiesDuplicate functions on group and local levelUnnecessary reporting activitiesDigital

44、 innovation/experience in AgileCustomer centricity/service?Marketing and analytics?HR and talent?Agile product development?Customer journeys?Omni-channel experience?Finance&Accounting,ControllingHR(Admin.)Legal/RegulatoryBack office customer service,if not STPAim for best-in-class cost levelsGOOD CO

45、STS:May spend moreTable stakes(Capabilities required by industry dynamics)Differentiating capabilities(Capabilities that build advantage)Eliminate or be parsimoniousAim for best-in-class cost levelsDecember 2022Strategy&Fit for Growth is about enabling sustainable growth not just cutting costsKey di

46、fferences of the Fit for Growth approach Source:Strategy&December 202215Benchmark-driven approach focused on matching competitionPhilosophyStrategy-back approach that protects“good”costs(differentiating capabilities)and reduces“bad”costsApplies a broad suite of cost reduction levers across all cost

47、pools in a uniform wayMethodologyPrioritizes capabilities,segments costs,and applies reduction levers at tailored intensityFocuses on structure “lines and boxes”and“spans and layers”Organization LinkageViews holistic organization design as key to transforming and sustaining the new cost structurePus

48、hes for a top-down cascade of leadership alignment and communicationsChange ManagementAdvocates culture-led change focused on scaling a critical few behaviors and leveraging employee“pride builders”Addresses sustainability during implementation as an afterthoughtSustainabilityIncludes org.process,talent and cultural enablers of enduring cost management from Day 1Makes you smallerMakes you strongerCost-reduction approachFit for Growth approach