Asset Managers Are Drowning, Not Waving
Profits have been flattered by rising markets. With markets lackluster this year, expect mid-sized firms to struggle most.
The tide is turning.
Photographer: Asit Kumar/AFP/Getty Images
It’s only when the tide goes out that you find out who’s been swimming in the nude, billionaire investor Warren Buffett famously opined. And as the bull market in global stocks starts to ebb, asset management companies will find themselves dangerously exposed — with medium-sized firms the most at risk of finding themselves naked and shivering on the beach.
Investment firms have been living on borrowed time. When indexed back to 2007, profits grew by a staggering 20 percent in North America and Asia last year, and by 18 percent in Europe, according to a study just published by consultancy firm McKinsey & Co. The picture was flattered, though, as booming stock markets helped swell global assets under management by 11 percent to a record $88.5 trillion.