Asset Management is a great business.
Though you might not know that from some of the numbers.
Take a look at how many of the listed fund management groups have done in the UK so far this year compared to the average stock.
| Manager | Share Performance |
| Schroders | -27% |
| Aberdeen | -20% |
| Legal & General | -11% |
| M&G | -11% |
| Jupiter | -8% |
| FTSE All Share | +7% |
Is it a similar story for Irish investment managers?
The headwinds facing the sector have been well rehearsed. It faces challenged revenues as pricing pressures mount, reflecting the continuous stream of cheaper alternatives such as ETFs and passive options. To this we add increased costs, especially regulatory, which can be a big issue for sub-scale players.
Investment options are getting cheaper. Even in the area of active management the average ETF fee is nearly 40% cheaper than the average fund. And the flow of money into these low cost ETFs continues at pace. With one month still to go, 2024 is set to be a new record-breaking year for the European ETF industry. The European ETF market gathered over EUR 27 billion in October 2024. This was its best month ever. Net inflows since the start of the year are EUR 188.3 billion: almost EUR 30 billion more than the full year record set in 2021. As ETFs make headway into traditional active management space, revenues can suffer. Irish ETF assets are expected to double in the next 4 years.
For Irish asset managers this fee compression is the single biggest concern, according to KPMG research.
The sector has seen huge growth – can it continue?
A recent survey of Irish asset managers predicted a growth rate close to 35% over the next 5 years. The abundance of investment platforms and the growing presence of large global players here sees a lot of asset management revenues move offshore. Other asset gathering avenues may fill some of the gap. Goodbody highlight the opportunity for investment managers in the €5 bn or so worth of wealth in the family office space in Ireland.
Another key factor in the growth of the Irish asset management industry is maintaining regulatory attractiveness. 77% of the Irish industry see it as the main driver for the future.
And the business is changing; especially with respect to technology. KPMG point out that 75% of asset management CEOs see AI as a business priority. This is a higher figure than across most industries. But only 30% of asset managers feel they could cope with a cyber attack. KPMG point out that technology investment by asset managers needs to be carefully assessed and prioritised, but cannot be delayed. The consequences for Irish asset managers lie across a range of areas including client relationships, and the efficiency of the investment and administration processes,
For many, the solution to the cost issue is scale. So we see continued corporate activity in the asset management arena. The most recent example in Europe is the possible Natixis/Generali tie up. Nearly 90% of asset management companies globally claim a strong interest in future merger or acquisition activity. Many firms are considering their “strategic options”. For example, here in Ireland, BCP, which has been very successful, is considering its future shape in this changing landscape. They have already been the subject of interest from a number of firms.
As well as outright acquisitions, Ireland is likely to see more collaborations and partnerships in asset and wealth management. 0ver 60% of Irish asset managers expect further corporate activity in the next 12 months.
Irish investment managers are deeply entrenched in the same sweeping trends that we are seeing in the industry in Europe and globally.
How individual firms fare in this wave rests firmly on where the managers sit on both the scale and the product spectrum.
Tradewinds 