According to a recent survey, 1 out of every 6 asset management businesses will be gone by 2027.

Over the next four years, the asset management sector will undergo substantial consolidation, with one in every six businesses likely to go out of business due to a combination of market volatility, high-interest rates, and fee pressure.

According to a PwC poll of 500 asset managers and institutional investors, 16% of existing asset and wealth managers would go out of business or be acquired by larger organisations by 2027.

According to the worldwide poll, over three-quarters of asset managers are considering purchasing or merging with a rival as business models are under pressure in a difficult market climate.

The bad forecast comes as fund managers grapple with the largest decline in assets in a decade.

According to PwC, the amount handled by asset managers declined 10% between 2021 and 2022, from a peak of $127.5tn to $115.1tn, as decreasing markets across asset classes reduced management and performance fees.

Managers blamed the drop on inflation, market volatility, and interest rates, with just under half forecasting that environmental hazards and geopolitics will only worsen the situation.

With a series of high-profile mergers and acquisitions, the global asset management business has been quickly responding to these challenges and attempting to access new customers or areas of development.

"I think you'll end up with a handful of UK wealth managers managing in excess of £100 billion," Chris Woodhouse, CEO of wealth manager Evelyn Partners, which has also acquired smaller advisors this year, told the Financial Times last month.

PwC further forecasts that the top ten conventional asset managers will control half of all mutual fund assets by 2027, up from 42.5& in 2020.

According to the survey, 90% of managers agree that technological innovations such as generative AI and blockchain will enhance returns and attract young investors, whose relevance is likely to grow as they inherit $68 trillion from the previous generation, according to PwC.

Costs for active and passive investment funds have already dropped by one-fifth to a quarter between 2017 and 2022, to the benefit of larger firms whose scale allows them to absorb fewer costs.

(Sources: financialtimes.com)