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2011 to be pivotal year for asset management industry, says Skandia

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2011 could be a defining year for the global asset management industry, according to research by Skandia Investment Group.



Now in its second year, the study – which questions 40 fund management groups with combined assets under management of over USD2trn – reveals that while under greater pressure and scrutiny from regulators, investors and their peers, asset managers see 2011 as being packed with opportunity for those able to position themselves correctly.
 
The burden of regulatory change shows no signs of diminishing, with 85 per cent of respondents expecting to spend more time managing regulatory issues over the next 12 months.

While just under half (46 per cent) of those surveyed believe the Retail Distribution Review will have no impact on the way they do business in the UK, the vast majority (76 per cent) believe the proposed changes to Ucits IV represent an opportunity they are keen to make the most of.
 
The research shows the majority of the industry (64 per cent) expects to see the use of performance fees increase further over the next 12 months, while at the same time indicating that in some areas of the market annual management charges will be under increasing pressure as a direct result of the rise of passive products including ETFs.
 
A clear and likely permanent shift would appear to be in the area of risk targeted funds, with investors looking for more certainty in terms of risk rather than returns. Sixty two per cent expect the level of demand for risk targeted funds to increase next year while none of those questioned thought demand would decrease.

A similar trend was seen with multi-manager investing, where only 12 per cent felt the growth seen in the last few years would go down. Sixty two per cent felt the fastest growth for multi-manager would be seen in the retail market.
 
The survey also revealed that the use of platforms by asset managers is set to surge over the next three years. The findings reveal that while many asset managers already see platforms as an important distribution channel – 71 per cent of those surveyed transact at least 25 per cent of their retail business via a platform with 43 per cent transacting over 50 per cent – the vast majority (79 per cent) believe their business will see a further increase in their use over the coming years.
 
Consolidation remains at the forefront of many firms’ minds, with 76 per cent expecting to see increasing consolidation over the coming year. Of this number, more than half (55 per cent) believe it will be led by large firms looking for cost synergies through the purchase of their competitors or boutiques. Of those surveyed, 53 per cent expect to see fewer boutiques over the coming year.
 
Despite the various headwinds, the fund management industry remains positive about the outlook for growth. The results highlighted a number of factors that point to industry expansion, with nearly half of respondents (45 per cent) expecting to expand into new markets in 2011 – with Europe and Asia presenting the best opportunities – and more than 60 per cent saying they would be looking to take on new investment and distribution staff.
 
Nils Bolmstrand, Skandia Investment Group’s chief executive officer, says: “One of the most gratifying aspects of this year’s survey is just how positive the fund management industry actually is despite the very obvious headwinds. Most firms we questioned are upbeat about the state of the industry and anticipate growth in assets under management in 2011 as they look to expand into new markets.”

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