By Charlie Ruffel
July 10, 2019
It is hard to gain a clear view into a business roiled by kinetic change. Asset management is such a business. We discern differences but not yet outcomes, although the outlines are coming into focus.
Let’s look at the changes, or at least the obvious ones. The shift to passive investing is massive and secular — but it has its limits and we are within sight of them. Fees, meanwhile, are moving south and will shift to more flexible and aligned constructs; this is a reflection of the transfer of power from asset managers to asset owners, and alignment of fee structures is already finding a new equilibrium. Distribution, too, is evolving: the sales-driven model is insufficient to meet the needs of intermediaries and asset owners, big or small.
The lessons taken so far from these changes are ill-conceived and all are drivers behind the incessant obsession with scale. Somehow the great asset gatherers of the past two decades are seen as the great asset managers. The scale players, the story goes, will inherit the earth: this is the age of BlackRock, Goldman Sachs, Allianz and Blackstone. It is precisely the wrong conclusion.