The 10 biggest trends in asset management for 2025

23 January 2025 Consultancy.uk

As 2025 gets under way, the global asset management market is at a crossroads, with several difficult years behind it, but new challenges still ahead. Experts from Oliver Wyman have outlined 10 key areas, where asset managers can safeguard and strengthen their businesses in the year ahead.

2024 was a tumultuous year, with heightened geopolitical tensions, climate change driving a rise in extreme weather events, and widespread social upheaval. According to Oliver Wyman’s insights, “most markets shrugged these off”, and with inflation beginning to slow, the new year begins with a certain amount of optimism.

However, there are a number of key trends – opportunities and challenges – brewing which will shape asset management in 2025, and may negatively impact any firm that fails to deal with them. To that end, Joshua Zwick, Kamil Kaczmarski, Julia Hobart, Lubasha Heredia, Ben Phillips, Dennis Zhang, Amrik Chawla, and Liza Bukingolts have explored 10 points on which asset managers will need to adapt in the next 12 months.

1. Integration becomes integral

Clients needs are evolving, and need holistic solutions and seamless experiences to meet demands of their own customers. However, few asset managers have adapted to exploit this opportunity so far. Firms which show they have integrated capabilities, including product manufacturing, distribution and advisory, asset servicing and administration, and risk intermediation, are well positioned to benefit from this trend.

The experts argue, “That will change as firms get serious about breaking down business silos, unifying data models, aligning around enterprise incentives, and reorienting their operating models to create solutions that reflect clients’ preferences, not outdated organisational structures. The $400 billion retirement market is the model use case for an integrated approach — serving it well requires pulling together asset management, advisory, insurance, and technology capabilities.

2. The melding of public and private

Investors have always looked for reliable outcomes at the best price, but delivering those results is no longer solely the preserve of public assets nor private assets. The Oliver Wyman professionals instead suggest that asset managers will need to blend listed and unlisted securities – with credit products first in line – to build better outcomes.

They add, “We expect that semiliquid pooled vehicles, where assets have grown 19% compounded annually since 2018, will keep improving (looking at you, European Long-Term Investment Fund); better technology will facilitate custom delivery; and exchanges will build necessary infrastructure, including secondary markets. It won’t be easy: Structuring, selling, and pricing innovative cross-capital products are challenges that a growing number of partnerships and mergers designed specifically for these offers will need to address.”

3. Seed or secede

To maximise value of their asset managers, insurers scour for sources of growth. In the future, they will take more dramatic steps to unlock the value in their asset management businesses, which collectively manage $9 trillion of assets. According to the experts, this will present four important opportunities.

First, going “all-in” on asset management and restructuring the business to become an “asset management-led insurer”, clients may focus on originating (or reinsuring) liabilities to fund their investment strategies. Others may “aggressively utilise seed capital programs and find creative ways to leverage the balance sheet”, in a bid to supercharge growth of investment strategies. A third variation will see an internally-focused “asset management utility” created, to manage the general account and/or serve the specific needs of the enterprise. Finally, insurers may “monetise the value of the asset management through a spinoff/sale and plough that cash back into their core business”.

4. Distribution value greater than investment value

Of course, the performance of investments will continue to matter, but its role as a differentiator will decline amid a number of other important factors. In future, a “winning formula” will become exceptional distribution and relationship management combined with “competitive” performance.

Oliver Wyman’s consultants explain, “It is not uncommon for firms to spend up to 80% of their technology budget directly supporting the investment engine, and investment teams to contribute to approximately 50% more of the total comp expense than distribution teams. Going forward these disparities are going to moderate with a greater share of dollars going towards enhancing distribution and relationship management capabilities. That next generative AI use case rollout, advanced data and analytics investment, or star senior hire? It may not go to the investment engine.”

5. Managers reassess international footprints and go “glocal”

Many asset managers in the US and Europe have “failed to dramatically raise the portion of their assets managed for clients outside their region”, according to the experts, despite significant expense. Among large asset managers, the average foreign-client share dropped from 23% to 21% since 2018 – meaning asset managers might benefit from re-evaluating the importance of local clients instead.

“Local clients favour products that feel homegrown, and hometown firms have upped their games, while international distribution costs have ballooned without producing results at many firms,” they note. “Poorly performing foreign forays will not eliminate global ambitions, but they will prompt managers to shift costs from a wide range of countries into a select few where they’ll build (organically and inorganically) larger, more local-looking product sets and business models.”

6. Quant strikes back

Oliver Wyman’s consultants state, “The pressure on active management continues to intensify, raising concerns about the future of many active investment management businesses. This pressure stems from factors such as claims of mediocre performance, declining fee levels, and rising production costs.”

However, asset managers can bounce back if they recognise “the advantages of systematic investment strategies that harness quantitative tools and signals to create efficient portfolios at scale and at significantly lower pricing”. By integrating quantitative portfolio construction tools into fundamental strategies, firms can help to reduce production costs as much as 30%, helping to re-energise their active franchises in the process

7. Direct dial for dollars

Asset managers increasingly find themselves as “commoditised components”, working through intermediaries, incurring high client acquisition costs, and gathering little knowledge about their end users. In the future, leading managers will need to find a way of cutting out the middle-man, with “direct distribution strategies” to help collect data and build deeper understanding of needs, which are vital for designing client-specific outcomes.

The experts add, “Captive and direct approaches also carry services and advice that can keep clients when performance lags. Fears of channel conflict are overblown in a world where many investors split their money between self-directed and advised portfolios. Captive and direct sales of mutual funds are already 15% of the world’s total and will rise.”

8. Exiting the exchange

Alternative asset managers, mostly focused on private markets, now account for 70% of the global sector’s market capitalisation, having grown sixfold in value since 2018. This means many traditional asset managers are pursuing root-and-branch transformations to compete – as excluding the very largest, they have not “appreciated at all”. With traditional forms of investment far between, to succeed in this way, many will need to think creatively.

According to Oliver Wyman’s experts, “Financial sponsors will remain sceptical of the growth case for traditional asset managers and question the lofty multiples for their alternatives-oriented counterparts. Expect several quoted asset managers to leave public markets or seek a degree of insulation by means of creative mergers and acquisitions (M&A), using patient capital from longer-term strategic investors; pursuing combinations with group financial services companies; and/or exploring the possibility of management buyouts.”

9. Collaborative cost-tackling

“Asset managers are increasingly beholden to technology and service providers that they have outsourced large portions of non-core functions to,” the consultants explain, “as well as specialised vendors providing access to critical data and processing power required to enhance investment processes and distribution effectiveness.”

Within market data alone, 8% to 15% annualised contracting increases are the norm. To help fight these cost pressures, managers will increasingly turn to more “strategic arrangements” with partners, they argue. This will include data sharing collaborations with other managers, and strategic partnerships with vendors to help build business “in return for preferential terms”.

10. Retirement income solutions innovations

Finally, widespread adoption of retirement income solutions is coming closer to reality amid an explosion of innovation. Alternative managers, insurers, and technology providers are collaborating to release a stream of new products that promise more income and longevity protection in simpler, “more guaranteed” models.

The experts conclude, “The urgency of income solutions is rising as traditional sources of guaranteed income (government and corporate pensions) are disappearing in conjunction with aging societies. Regulatory reforms and public policy actions are also encouraging adoption. While many solutions will never reach escape velocity, we expect that a few will begin to distinguish themselves with compelling offerings and stake out a claim to becoming the market standard.”

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