A truism in the investment industry is that rising AuM equals rising profits. A recent McKinsey survey into 2016 profitability for Active Fund Managers shows that this relationship has broken down - rising costs of business coupled with fee pressure from passive investment are all contributing to growing strains in the active management business model.
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2016 - A Turning Point for Active Investment Management
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Traditional fund houses in the US, Europe and Asia failed to translate growth in assets under management into higher profits last year, a “remarkable turning point” for an industry struggling under the weight of tough competition.
Research provided by McKinsey to FTfm found that worldwide profits for traditional mutual fund companies fell 2.9 per cent in 2016 to €66bn even though their total assets under management rose 3 per cent to €66tn.
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