Globally, asset management firms are managing record sums and earn profits rarely seen. In Germany, assets under management have grown strong while profit margins of managers were falling.
According to the Boston Consulting Group (BCG), the globally managed wealth increased to an amount of 74 trillion USD. This was achieved mainly with the value increase of existing assets as shares and bonds.
Profits of asset management firms have reached 102 billion USD, says BCG according to fondsprofessionell.de and are thus as high as in 2007. Despite asset management being one of the most profitable business fields, profits are lacking behind AuM growth. This is due to an increased price pressure and the switch to passive from active products, says the BCG study.
A recently published McKinsey study shows that costs in asset management have risen. In Germany, the profit margin has fallen from 19.6 to 18.1 basis points or 1.81 percent of assets managed. “Although asset management firms are lowering costs, the trend for index and other passive products is decreasing margins,” says Philipp Koch, Direktor at McKinsey & Company in Munich, in a press release.
According to McKinsey, assets under management in Germany have increased by 15 percent to 2.4 trillion Euro. “Asset management firms can now from a position of strength pursue the upcoming changes in their industry,” says Koch. One of those changes is the digitalisation. “On the one hand, margins are lower in this segment while the shift to digital products comes with substantial investments in infrastructure,” Koch explains.