The global asset management industry saw a significant rebound in 2023 after a challenging year in 2022. Total assets under management (AuM) surged to nearly $120 trillion, marking a 12% increase from the previous year’s downturn of 9%.
This recovery was widespread, with all regions of the world experiencing growth. North America led the way with a 16% increase, while Asia-Pacific markets, excluding Japan and Australia, saw a more modest 5% growth. However, beneath these positive numbers lies a deeper vulnerability within the industry.
Despite the growth in AuM, the industry’s revenues only saw a marginal increase of 0.2% in 2023. Meanwhile, costs rose by 4.3%, resulting in an 8.1% decline in profits. These challenges underscore the need for asset managers to embrace innovation, particularly in the realm of artificial intelligence (AI).
According to Dean Frankle, a managing director and partner at BCG, asset managers must confront several structural pressures to remain competitive. These include the continued pressure on revenue, the popularity of passive funds, fee compression, rising costs, and the struggle to launch successful new products.
To address these challenges, asset managers are increasingly turning to AI. A survey conducted by BCG, in collaboration with the Investment Company Institute (ICI) and the CFA Institute, revealed that a majority of asset managers see AI as a strategic priority for their business. Many are actively investing resources in AI deployment, recognizing its potential to drive growth and innovation within the industry.
Peter Czerepak, a managing director and senior partner at BCG, emphasizes the transformative impact of generative AI (GenAI) on asset management. He highlights the importance of strategic thinking and execution at scale to unlock the full potential of AI in driving innovation and addressing the industry’s challenges.
In summary, the adoption of AI represents a critical opportunity for asset managers to navigate an increasingly complex and competitive landscape. By embracing AI technologies, firms can position themselves for future success and drive sustainable growth in the years to come.
