Asset managers to suffer into 2009
Asset managers will suffer the impact of the credit crunch into 2009 as investors push assets into less risky products that generate less fees, according to new research.
Dushyant Shahrawat, research director for investment management at Massachusetts-based consultancy Towergroup, said: "Asset management fees and therefore firms' revenues for traditional managers will decline because investors are withdrawing money from active funds, and because a sharp drop in asset prices has led to major declines in fund values."
He added that both institutional and retail investors will redeploy assets to money market funds and other conservative strategies. He said: "The shift in asset allocation will directly depress fund fees over the next two to three years until investors decide to return to products that are more aggressive (and generate higher fees), which may take two or more years."
The comments come in a report on the continuing impact of the credit crunch on asset managers.
In an interview with US publication Pensions & Investments, Shahrawat predicted that the proportion of institutional assets in traditional active strategies could plunge to 52% by 2009, down from 66% in 2005, and 72% in 2001.
The researcher said that changing attitudes to risk would force asset managers to revisit their risk management processes. He wrote: "They must redouble their efforts to examine internal risk management measures and processes. In this way, they can ensure that they quickly and correctly value their exposure to risky assets and communicate this to fund boards and investors."
The analysis comes as increasing numbers of investors shift assets to passive strategies such as index-tracking funds. Since the beginning of the year Dutch pension fund manager has shifted €10bn ($15.7bn) of assets into passive strategies and Denmark's largest pension funds ATP moved its emerging markets money into passive mandates, and last year consumer goods group Procter & Gamble decided to transfer most of its UK scheme's assets into passive strategies.
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