Fund Management in the Post-Crisis Environment

We consider the post-crisis environment for the asset management industry. Whilst this may be considered over-optimistic, financial markets have experienced signs of stabilisation and recovery, with volatility having fallen significantly from its peak. Government interventions have helped support rallies in both the equity and bond markets; but the recovery is still fragile and not as broad-based as the market levels might suggest.

Significant falls in the value of most asset classes at the end of 2008 and in the first quarter of 2009 had a major impact on asset-management firms and more widely in the financial industry. Falling revenues forced many asset-management firms to cut costs aggressively. More recently, we have seen a relatively high volume of mergers and acquisitions (M&A) activity in the asset-management sector. Both of these developments have increased the likelihood of certain risks; particularly those related to the retention of key staff, IT integration, and ongoing management of a large number of outsourced service providers. As asset managers address the impacts of these risks, we expect increased demand for staff with the relevant experience.

A perhaps surprising positive is the current relative strength of the retail-funds sector of the industry in the post-crisis environment. 2009 was a surprisingly strong year in terms of net retail sales for the funds industry. The Investment Managers Association (IMA) has recently reported that net retail sales for the 11 months to end November 2009 were ten times higher than over the equivalent period in 2008. The relatively broad-based resurgence of the retail-funds industry seems to be providing a strong platform for product innovation. There is increased appetite for new strategies and investment approaches, and a number of new entrants are joining the retail market.