Fund Firms Face (More) Tough Times

June 16, 2003 ( - The fund management industry has been through some tough times - and it's not out of the woods yet, according to a new study.

In fact, the Boston Research Group survey suggested that roughly 20% of fund managers are now losing money, while another 20% were “marginal.”   BRG said that of the large players in the survey of 40 large asset management firms, most of whom were managing assets of at least $100 billion, 7% were losing money, while nearly a third (30%) reported pretax margins of between nothing and 19%.

On the other hand, 10% of respondent firms reported pretax margins of 50% or more.

The BRG report says the industry could be looking at compound annual average growth rates of as little as 0.7% to 6% between now and 2006, compared with a 14% rate between 1995 and 2000.   If the worst-case scenario is realized, industry profitability could fall to $20 billion by 2006 from $34 billion last year, according to Reuters.   Under a “best case” scenario, profitability was likely to be flat at about 11 basis points on assets managed.

The survey calculated that on a global basis, professionally managed assets fell 8% last year to $31 trillion from a year earlier.

The BRG report said that fund managers in the US and the UK benefit from working in an open market with a large number of independent players, while Continental European firms tend to be linked to banking and insurance groups which control distribution and restrict revenue opportunities.

Still, looking at where asset losses were worst, the BRG report said Britain topped the survey’s list of declining assets under management by major investing country, suffering a 17% slide to $2.3 trillion from 2001 to 2002.   Second most impacted was the Netherlands, which saw assets drop 12% (to $500 billion), while Germany’s 10% decline to $1.1 trillion was third.