UK - The fund management industry appears to be responding to warnings of significant profit declines, according to consultants PricewaterhouseCoopers (PwC).
But the biggest question is whether results are sustainable in the long-term, and whether firms are prepared to cut costs by reducing bonuses.
The news follows PwC’s earlier annual 2001 investment management survey which warned fund managers that if market trends persisted - a “double whammy” of competitive pressures and market volatility - margins could be halved to 15% within one year.
However, an interim update of the survey, carried out in October, revealed that margins have so far fallen by only a quarter, a move driven by sustained revenues and firms keeping a check on rising costs.
According to the firm, the results also revealed the impact of short term cost management measures - 80% of fund management companies have so far taken steps to reduce and/or defer investment spend; 75% have significantly reduced marketing spend, and just over 60% have curtailed recruitment. Furthermore, 33% have also launched new alternative investment products, generating higher fees.
Commenting on the results, PwC Consulting partner Graham Wright said: Most fund managers have now taken the relatively easy short-term steps to protect this year's profits. The challenge now is to make the right structural changes, for example, through product rationalisation and operational restructuring to lock in longer-term, sustainable benefits without constraining growth.”
He added: “Few have yet transferred the pain directly onto their staff; only one in four have so far implemented redundancy programmes. The big question that remains is the extent to which margins will be managed up through reducing discretionary bonuses. For most, no decision has yet needed to be taken, but most are actively reviewing bonuses for a decision at the end of the calendar year.”
The fund also found that in order to sustain improvement, more than 50% of fund managers were pursuing fundamental reviews of their operations, with a further 33% outsourcing parts of their operations and 40% considering the option.
*The most recent full survey was published in July 2001, representing 23 fund management organisations with combined assets under management of more than £1,100bn. The current update covers 21 firms with more than £1000bn under management.
By Madhu Kalia
Railways Pension Trustee Company chief executive Phil Willcock has quit the scheme after only 10 months to take up a position as head of AIG UK Life.
The Financial Conduct Authority (FCA) has launched a consultation on how to enable defined contribution (DC) savers to invest in patient capital via unit-linked funds.
The Pension Protection Fund has published its final levy rules for 2019/20 following a consultation launched in September.
The Competition and Markets Authority's (CMA) final report on the investment consultant market has been celebrated as having "real teeth" to produce better outcomes for members.