The profitability of US asset managers could have peaked in 2007 and struggle to rise further, due to rising costs and the credit crunch, according to analysis by investment bank Keefe, Bruyette & Woods. Reported pre-tax operating margins for traditional asset managers averaged 33 per cent last year, the highest level since the previous peak of 34 per cent in 1999 at the height of the dotcom boom, according to the research. The report added that the recent growth from a low of 30.3 per cent in 2002 was generated from strong revenue increases in the last two years, but pressures on assets growth this year could slow the rate of margin growth. Analysts said reasons for tighter profit margins included rising compensation costs to retain staff, a shift to products with lower fees, the need for growing firms to increase their spending on distribution, and increased regulatory and legal costs.