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More than $600 billion of client cash has headed for the exits since 2018 from investment funds at T. Rowe, Franklin, Abrdn, Janus Henderson Group Plc and Invesco Ltd. That’s more than all the money overseen by Abrdn, one of the UK’s largest standalone asset managers. Take these five firms as a proxy for the vast middle of the industry, which, after hemorrhaging client cash for the past decade, is trying to justify itself in a world that’s no longer buying what it’s selling.
Bloomberg News analyzed more than five years of money flows, fees, investment performance, revenue and profit margins at the five firms, as well as trends across the industry, to show how the active managers are at greater risk than ever before.
The previous generation of CEOs made myriad attempts to turn things around: They slashed fees , they merged with rivals , they jumped on various bandwagons, such as ESG, hoping to give themselves an edge . Nothing worked. “The middle players can’t grow organically out of this scenario,” said Evan Skalski, an associate director at Alpha FMC, which consults the top 20 global asset managers. “They can try to manage the costs and keep the current business running, but they’re going to have to be OK with a low-growth or no-growth story.”
“Historically this industry would create new products in a vacuum without thinking of the actual need of the client,” he said. Dibadj said he’s been in frustrating meetings where customers weren’t even aware of what the firm has available. “That’s surprising and bothersome to me.” “If you don’t change the model of your business, the fee compression and overcapacity in asset management is going to take you out,” Bird, a former Citigroup Inc. executive who took the helm at Abrdn two years ago, said in an interview. Exchange-traded funds have changed the business, he said. “There’s no debate: the machine won. You need businesses that are not just in pure active asset management.