ASSET MANAGEMENT MOVES INTO THE SPOTLIGHT

INTRODUCTION

The ramifications of the recent global financial crisis are still being felt today, yet economic optimism is slowly starting to return. But the financial services industry, one of the hardest hit, is still facing challenges due to the decline of the global economy, the Eurozone’s sovereign-debt crisis and an avalanche of regulations. Despite this, the consequences of current developments and long-term trends could result in opportunities that catapult asset management into the spotlight. As regulations come into force, banks are lowering their high pre-crisis leveraging levels and restricting their lending activities to comply with new capital requirements. Traditional sources of financing are drying up and securing loans has become a primary challenge, especially for many SMEs. This setting welcomes non-banking solutions, creating an opportunity for asset management to move into the spotlight. Additionally, the ongoing urbanisation of the world, especially in SAAAME (South America, Africa, Asia and the Middle East) countries, and the need for infrastructure renewal in developed countries amid constrained government budgets and reduced bank lending are producing financing gaps that

asset management is ideally suited to fill. The rise of state directed capitalism and the rapid growth of sovereign wealth funds (which is set to continue) will also create favourable circumstances for asset managers to tap into a viable pool of assets. Aside from regulatory reforms and financing gaps, another, more natural force, is upending the financial industry: the aging population is increasing savings for old age provision. In the United States, more than 50 million U.S. workers are active 401(k) (retirement plans) participants. As of September 2012, 401(k) plans held an estimated $3.5 trillion in assets and represented approximately 18% of the $19.4 trillion U.S. retirement fund market. 4 The habit of saving for one’s future and investing for retirement is now also gaining momentum in Europe and beyond, which will result in the proliferation of assets in pension funds, one of the major institutional investor segments of the industry. On the opposite side of the age spectrum is the younger demographic that has come of age during one of banking’s darkest hours. These investors are not squeamish about seeking out alternative solutions and do not shy away from digital

4 Investment Company Institute

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