European asset management after an unprecedented year (2024)

European asset management after an unprecedented year (1)

European asset management after an unprecedented year

(17 pages)

The European asset management industry entered 2020 coming off record highs in aggregate revenues and profits. Then COVID-19 emerged early in the year, wreaking havoc on a global scale. While the human suffering and economic impact is ongoing, European asset managers weathered the challenges, ending the year with a record €25.2 trillion in assets under management (AUM), up 5 percent over 2019.

About the authors

This article was a collaborative effort by Sid Azad, Pierre-Ignace Bernard, Cristina Catania, Martin Huber, Niklas Nolzen, and Christian Zahn.

Overall, 2020 proved to be unprecedented for asset managers, as it was for so many business sectors. The year’s extreme conditions emphasize the industry’s shortcomings but also opportunities for further growth and enhancement of its standing with clients and the public at large. In this summary, we set out the most important trends facing asset managers and offer strategic recommendations for moving the industry forward once the COVID-19 crisis is past. In the full report, European asset management after an unprecedented year, we provide more detail and data for the full story.

A year of shocks—and new highs

The markets underwent intense stress toward the end of March 2020, and accordingly, European investors sought safer assets, withdrawing more than €100 billion in the first quarter. Markets quickly recovered, however, and with them net flows into long-term investments. The resulting €750 billion in net flows across all asset classes and segments increased European managers’ AUM by 3.2 percent for all of 2020, the third-highest annual net flow effect over the preceding 13 years.

In total, AUM in Western Europe expanded by €1.2 trillion to €25.2 trillion in 2020, a rate of 5 percent. However, rates of AUM growth slowed quite a bit: growth in institutional assets fell from 12 percent in 2019 to 5 percent, while retail asset growth declined from 15 percent to 6 percent.

The Western European revenue pool grew 7 percent for the year to €55 billion, and the profit pool increased 11 percent, to €22.8 billion. However, Europe’s managers again struggled to exploit the operating leverage once thought to be a fundamental feature of the business. Revenue margins eroded a bit, cost margins dropped by almost 1 percent, and overall profit margins were little changed at 13.6 percent, well below the industry’s 2007 peak (exhibit).

European asset management after an unprecedented year (2)

Looking deeper into these numbers, however, the absolute cost pool grew at 4.2 percent for 2020, highlighting how heavily the industry’s profitability relies on rising markets.

If asset managers can indeed focus on capitalizing on their economies of scale through greater control over costs, we estimate a significant potential for incremental profits—on the order of €15 billion. But the core question remains: Given the industry’s challenges in costs and competition, how can asset managers recapture their inherent operating leverage?

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Structural trends shaping Europe’s asset management landscape

While Europe’s asset managers emerged from 2020 in good financial shape, they still face important challenges from the economic, market, and social environments. In the full paper, we set out five trends and their impacts—some of long standing, others more recently emerged—here are a few of them.

Loose monetary policy

Accommodative central-bank policy has prevailed since the financial crisis and was further eased in first quarter 2020. A prolonged period of easy money policy will likely continue to support equity markets while suppressing the returns to fixed income, with commensurate responses in demand from retail investors.

Government intervention

Public deficits are expected to grow in the European Union to 95 percent of GDP by end of 2021. Ongoing fiscal stimulus to mitigate the economic impact will shape the future business cycle, and asset managers must evaluate the potential consequences when developing portfolio strategies.

A focus on environmental, social, and governance (ESG) performance

Governments and corporates in Europe have increasingly focused on sustainable investments, offering an opening for asset managers to show leadership in guiding Europe to a greener path and improved sustainability.

We also point to the momentum in trends toward digital business and the regionalization of the European economy. While digital channels are not new, COVID-19 has increased consumer and employee comfort with remote tools and working, calling for adjustments in portfolio holdings in favor of the more dynamic companies.

As for regionalization, European asset managers can expect increasing challenges in cross-regional ventures, stemming from country- and region-specific regulation, and greater pressure on managers to offer more localized and focused products.

European asset management after an unprecedented year (3)

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Rethinking asset management

Historically, the function of the asset management business was relatively straightforward: to serve as a financial conduit, matching private and institutional sources of capital seeking returns with firms needing capital for investment. Today the industry is more complex, serving a wider range of investor needs and objectives for growth, income, and capital. In our view, Europe’s asset managers must act on three broad imperatives to ensure a sound future.

1. Play a leadership role in shaping a sustainable future

As a group, asset managers have a voice that is heard by corporate boards around the world, and they should establish a leading position. They can do so by supporting the initiatives of governments, nongovernmental organizations, and industry groups and by steering capital flows in the most productive and sustainable directions.

2. Embrace technology disruptions

The shift to remote working in response to COVID-19 is an early indicator of the technological change we expect to occur over the next decade. The road forward for asset managers should include transforming their organizations to become more adaptive and continually learning.

3. Move the boundaries to capture additional profit pools

We see two levers for growth for Europe’s asset managers: capturing economies of scale and pushing the limits of the asset management market to new frontiers. To realize economies of scale, asset managers have to assess their firms’ operating models with an eye toward scalability, adopt cost-saving technologies, and decrease operating-model complexity.

From the perspective of revenue growth, managers need to undertake a dedicated effort to understand unsatisfied and underserved investor needs, so they can articulate a more compelling value proposition. This can take many forms: alpha generation, superior execution, simplified market access, improved risk control, richer diversification, and fulfillment of clients’ ESG goals.

For a deeper dive on the findings, download the full report from which this article is extracted, European asset management after an unprecedented year(PDF–8.0MB).

Sid Azad is a partner in McKinsey’s London office, Pierre-Ignace Bernard is a senior partner in the Paris office, Cristina Catania is a senior partner in the Milan office, Martin Huber is a senior partner in the Dusseldorf office, Niklas Nolzen is an associate partner in the Munich office, and Christian Zahn is a partner in the Frankfurt office.

The authors would like to thank Pascal Bretländer, Sarina Deuble, Stefan Engelhorn, Philipp Kroczek, Gunashrit Nag, Achim Schlitter, and Florian Wagner for their contributions to this report.

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European asset management after an unprecedented year (2024)

FAQs

How big is the asset management industry in Europe? ›

This relationship between European asset managers and their clients has resulted in the establishment of an industry totaling almost 30 trillion euros in AUM as of 2023.

How do you answer the question why asset management? ›

The interviewer, while asking this question, wants to learn and understand your motivations for working in asset management. You can highlight your interest and passion for the financial markets and perhaps your desire to help clients achieve their goals.

How do I pass an asset management interview? ›

Learning more about the Asset management Career Path can help with these discussions. Candidates could practice case studies and work through investment scenarios to demonstrate their analytical and decision-making skills. Also, doing mock interviews would help refining answers and boost confidence.

What is the outlook for asset management M&A? ›

M&A outlook for financial services in the second half of 2024. Despite a challenging market environment and slower than normal deal activity throughout the FS sector in the first half year 2024, we see potential for an uptick in M&A with an improved deal flow in the next six to 12 months.

Who is the best asset manager in Europe? ›

Ranking of the 10 largest management companies in Europe according to their AUM (2024)
PositionAsset ManagerCountry
1UBS GroupSwitzerland
2Credit AgricoleFrance
3Allianz GroupGermany
4AmundiFrance
6 more rows
May 9, 2024

Who is the number one asset manager in the world? ›

Largest companies
RankFirm/companyAUM (billion USD)
1BlackRock9,090
2Vanguard Group7,600
3UBS5,710
4Fidelity Investments4,240
16 more rows

What is your best asset interview answer? ›

Sample Answer

If you are asked to explain how you would be a valuable asset, you might answer in a way similar to this: Unlike most people in similar positions, I thrive on going above and beyond. I'm confident that I would bring many unique qualities to your company and provide many opportunities for improvement.

What makes a good asset management? ›

Some of the key skills required for a successful career in asset management include: Strong financial modeling and writing skills. Strong knowledge of financial markets, asset classes and risk. Ability to assess an investment's potential for return.

What is the main purpose of asset management? ›

The goal of asset management is to maximize the value of an investment portfolio over time while maintaining an acceptable level of risk.

How to get into asset management with no experience? ›

How to become an asset manager
  1. Obtain a finance degree. Earning a degree in finance is one of the biggest steps to becoming an asset manager. ...
  2. Consider an apprenticeship. ...
  3. Consider an internship. ...
  4. Apply directly. ...
  5. Obtain an entry-level role. ...
  6. Develop your skills. ...
  7. Work your way up to an asset manager position. ...
  8. Showcase your skills.
Jul 4, 2024

How competitive is asset management? ›

Investment banking and asset management are two of the most prestigious and competitive areas in the financial services industry, typically attracting highly qualified candidates from top universities.

How to break into asset management? ›

How to become an asset manager
  1. Get a relevant degree. Most asset management positions require candidates to hold a degree in finance, economics, business or a related field. ...
  2. Gain experience. ...
  3. Pursue professional development opportunities. ...
  4. Update your resume. ...
  5. Apply to asset management opportunities.
Jun 27, 2024

What is the highest salary in asset management? ›

Asset Manager salary in India with less than 2 year of experience to 15 years ranges from ₹ 2.3 Lakhs to ₹ 16.0 Lakhs with an average annual salary of ₹ 6.7 Lakhs based on 1.3k latest salaries.

Is JP Morgan Asset Management prestigious? ›

J.P. Morgan Asset Management is the investment management unit of JPMorgan Chase, one of the world's largest, most prestigious, most influential banks.

Is M&A a lucrative career? ›

M&A jobs are well paid: $110k salaries in year one are considered typical. M&A jobs can involve grueling hours. M&A juniors complain of 100 hour weeks. Two years in M&A can leave you well-positioned for the future, with opportunities available in private equity, hedge funds and elsewhere.

How big is the wealth management market in Europe? ›

The Europe Wealth Management Market size is expected to reach USD 43.02 trillion in 2024 and grow at a CAGR of 4.41% to reach USD 53.37 trillion by 2029.

How big is the asset management industry market? ›

Asset Management Market Research, 2032

The global asset management market was valued at $376.8 billion in 2022, and is projected to reach $8.3 trillion by 2032, growing at a CAGR of 36.5% from 2023 to 2032.

How big is the asset management market in the UK? ›

UK asset managers are now responsible for £11 trillion of mainstream assets and £2 trillion of alternative assets. It's also an industry which operates globally, with many UK firms operating as parts of asset management groups serving clients overseas.

How big is the facility management market in Europe? ›

The Europe facility management market size is projected to grow from USD 290.4 billion in 2022 to USD 426.6 billion by 2030. Key Industry Players: Major players in the Europe Facility Management Market include industry giants like: Sodexo (France)

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