The asset management industry experienced a revival in 2023, with global assets under management (AuM) reaching close to $120 trillion, a significant 12% increase compared to the previous year. However, while AuM demonstrated growth, the industry faced a decline in profits by 8.1%, indicating underlying vulnerabilities. These findings come from the 22nd edition of the Global Asset Management Report, AI and the Next Wave of Transformation, released by Boston Consulting Group (BCG).
According to the report, 72% of asset managers believe that generative AI will have either a significant or transformative impact on their organizations within the next three to five years. However, only 16% have fully defined a strategy and are actively working towards implementation.
The asset management industry is currently facing several structural challenges. Revenue pressure remains a prominent issue, as market performance can no longer be relied upon for revenue growth as it has in the past. Additionally, passive funds are gaining popularity, attracting the majority of net flows globally. In 2023 alone, passive products captured 70% of total global mutual fund and exchange-traded fund net flows. Furthermore, fee compression continues to accelerate, posing further challenges for asset managers. The average fee in 2023 was 22 basis points, down from 25 basis points in 2015.
Despite these challenges, asset managers are recognizing the potential of generative AI to drive growth and innovation within the industry. BCG’s survey revealed that 66% of asset managers have made generative AI a strategic priority for their businesses. Moreover, 75% are actively allocating capital and human resources for generative AI deployment, signaling a commitment to leveraging the technology’s potential.
The report emphasizes the importance of a well-executed AI strategy in order for asset managers to navigate the evolving landscape successfully. With traditional sources of growth slowing down, the adoption of generative AI can offer a path to new opportunities. Strategic thinking and effective execution will be vital for asset managers to capitalize on the potential of generative AI and drive future growth.
To learn more about the findings of the report, you can download it here: [link to the report].
About Boston Consulting Group:
Boston Consulting Group (BCG) is a global consulting firm that partners with businesses and organizations to tackle their most significant challenges and seize opportunities. With a focus on embracing transformative approaches, BCG works closely with clients to drive sustainable competitive advantage and positive societal impact. The firm offers a range of services, including management consulting, technology and design, and corporate and digital ventures, delivered by diverse, global teams of experts.
Source: Boston Consulting Group (BCG)
Asset managers are anticipating a game-changing impact from generative AI, according to a report by Boston Consulting Group (BCG). The report reveals that 72% of asset managers believe generative AI will have a significant or transformative effect on their organizations within the next three to five years. However, only 16% have fully defined a strategy and are actively working towards implementation.
The asset management industry is currently facing several structural challenges. One of the main challenges is revenue pressure, as market performance can no longer be relied upon for revenue growth. Passive funds are also gaining popularity, with 70% of total global mutual fund and exchange-traded fund net flows going to passive products in 2023. Fee compression is another challenge, with the average fee decreasing from 25 basis points in 2015 to 22 basis points in 2023.
Despite these challenges, asset managers are recognizing the potential of generative AI to drive growth and innovation. The report states that 66% of asset managers have made generative AI a strategic priority for their businesses. Additionally, 75% are actively allocating capital and human resources for generative AI deployment, indicating a commitment to leveraging the technology’s potential.
Advantages of generative AI for asset managers include the ability to automate certain processes, improve decision-making through data analysis, and enhance risk management capabilities. Generative AI can also enable asset managers to identify new investment opportunities and improve client satisfaction through personalized offerings.
However, there are also disadvantages to consider. Implementation of generative AI requires significant investment in technology infrastructure and talent development. There may also be concerns around data privacy and security, as well as ethical considerations in the use of AI algorithms. Furthermore, reliance on AI technology carries the risk of algorithmic bias and potential errors that could impact investment decisions.
In conclusion, generative AI has the potential to revolutionize the asset management industry. Asset managers are recognizing its importance and are actively prioritizing its implementation. However, strategic thinking, effective execution, and addressing challenges such as revenue pressure and fee compression will be crucial for asset managers to fully capitalize on the potential of generative AI and drive future growth.
For further insights, you can download the report from the Boston Consulting Group (BCG) website: BCG Report.