Arnaud Tesson Practice Group Leader, Boston, New York
The asset management sector has been seriously affected by the events of the last three challenging years. This is not just the result of a profitability crisis, but more a reflection of deep structural issues affecting the core beliefs of the segment. There are signs of recovery amid the turbulence: By the end of 2010 global assets under management had returned to the level of 2007 (due to market movements, as net flows remain close to zero). CEO agendas are typically built around three priorities: stabilizing the business, restoring operating performance and repositioning the organization for the future.
The combination of market underperformance, falling assets under management (AUMs) and clients’ demands for simpler, “safer” asset classes has precipitated a dramatic decline in revenues and profits. Profitability has picked up, but it is still below 2007 levels, and unlikely to return to those levels for some time as costs continue to rise in absolute terms. Market players also have to cope with the increasing power of distributors (although for bank-owned entities the battlefield is deposits), increased regulatory intervention and ownership changes.
What skills are needed?
From a board perspective, we continue to expect more appointments of financially literate non-executives to asset management boards to strengthen business oversight, enhance risk awareness and challenge incumbent managements. At the senior management level, turnover is beginning to increase as boards emphasize efficiency and cost management over growth. Risk management needs to be revolutionized. In portfolio management, we expect strong demand for asset allocation and credit skills, particularly in distressed security investing. We also see potential for team lift-outs. In sales and marketing, we expect greater solution-orientation and a self-starter culture to prevail, with a focus on serving clients, rather than pushing products. Lastly, compensation packages are also being reviewed.
How can Egon Zehnder support the asset management industry?
Egon Zehnder’s global Asset Management Practice consists of a highly professional team of over 40 consultants positioned across the world. Our team partners with senior executives of organisations in all sectors of asset management to address hiring needs, assist with the assessment of existing management competencies and support boards of directors.