McKinsey: Gap Widening Between Best and Worst Asset Managers

McKinsey & Co.’s annual review of the North American asset management industry (published in November) shows that in 2017, “managers in the top quartile grew revenue by 21 percent versus just 2 percent expansion for those in the bottom,” according to an article in Institutional Investor.

The article reports that in the prior year, top managers grew revenue by 5 percent compared to fourth-quartile firms which showed shrinkage of 9 percent. “Their ability to capture new money,” the article adds, “proved an even starker divide.”

Ju-Hon Kwek, one of the report’s authors, said, “Amid the positive economic and markets picture, firms pulled apart in organic growth, the most important metric, which we think of as a firm’s ability to take on new money regardless of market conditions.” The report, which was based on data from 100 managers representing 80 percent of the industry’s assets under management, stated, “In what should have been an exceptional year for nearly every firm, the gap between over- and under-performers widened in significant ways.”

Although the year was a good one for the industry on the whole, the article says, Kwek argues that the 11 percent growth in global assets under management belies “broad-based trends underpinning a market of haves and have-nots.” He believes, “we’re moving from a world where there were 300,000 advisors making independent decisions to a smaller number of people at the home office controlling how products get distributed.”