Asset Management Industry Crisis

Posted by Ed 21 mths ago
Asset Managers With $74 Trillion Are Perched on Brink of Crisis

The industry that gave rise to investing titans Peter Lynch, Bill Miller and Bill Gross is facing an existential crisis.

For years, mom-and-pop investors frustrated by high fees and subpar returns from big-name money managers have been shifting their savings into ultra-cheap funds that simply mimic the returns generated by benchmark stock and bond indexes. Passive investing, as it is known, was in. Active was out.

At first, few noticed the trickle of money out of funds run by star money managers into cheaper index products. But now, no one can ignore the flood.

 The exodus from active funds has sent fees inexorably lower, led to the loss of thousands of jobs, forced large-scale consolidation among firms and pushed the industry to the brink of a shakeout that only the strongest will survive.

Now, those forces are so strong that the $74 trillion industry, as measured by the Boston Consulting Group, is on the brink of a shakeout that only the strongest will survive.

“We’re clearly at a watershed moment,” said Philip Darling, head of partnerships at The Buy-Side Club, a consultant to the investment management industry.

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