McKinsey: Traditional asset managers trapped in a “vise-like” squeeze
| Sep 16th, 2007 | Filed under: Institutional Investing | By: Alpha Male |
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In its annual survey of the asset management industry last year, McKinsey proclaimed that there was a gap opening up between the winners in the asset management industry and the “also-rans”. The report went on to articulate five “major pressure points” in the asset management business”:
- A dwindling ability to gather assets
- Rapid polarization of flows resulting from alpha-beta separation
- Pricing under pressure
- Productivity stalling
- Persistently high outflows
This year’s survey (conducted jointly with Institutional Investor’s “U.S. Institute“) reveals that traditional asset managers are responding to these threats – particularly those resulting from the separation of alpha and beta. Says the recently released 2007 edition:
“Traditional asset managers are not only taking the threat seriously, they are striking back with a vengeance. For example, the results of the most recent benchmarking study by McKinsey and Institutional Investor’s U.S. Institute reveal that a full two-thirds of all traditional asset managers operating in the institutional market now offer alternative products, in the form of hedge funds, private equity, structured products and real estate. Moreover, an astonishing proportion of these firms’ institutional revenues – more than a third – is now coming from alternatives. Just five years ago, that proportion would have been close to nil.”
The report says the growth of traditional investment products is stalling since these funds are “trapped in a vise-like squeeze” between higher-growth true-alpha and cheap-beta products.
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