In spite of the fact that asset managers have rebounded from the financial crisis, as demonstrated by the global value of professionally managed assets rising by 8 per cent from 2009 to 2010, building on this recovery and achieving a stable growth trajectory will remain a big challenge, according to a report by Boston Consulting Group entitled Building on Success: Global Asset Management 2011.

The report states the global value of professionally managed assets rose to $56.4 trillion in 2010, following a gain of 13 per cent in 2009 and a decline of 17 per cent in 2008. The rises in 2009 and 2010 are attributed principally to the continuing recovery of equity markets, with net new inflows remaining marginally positive. Nevertheless the report indicates that economic uncertainty in the post-crisis world is still a problem.

“Economic uncertainty lingers. Investors are becoming ever more demanding, and the full potential of money in motion will be difficult to capture. The question of how to achieve further growth in both mature and emerging markets is a daunting one. Asset managers will need to forge thoughtful strategies in order to build on the successes we have seen,” said Kai Kramer, a BCG partner and a co-author of the report, adding that despite the continued recovery asset managers still have their work cut out for them.

One problem the report outlines for the “post-crisis evolution” of the global asset-management market is that investor demands keep toughening. This is attributed to the financial crisis introducing great market uncertainty and calling traditional investment beliefs into question, making investors more likely to scrutinize and challenge the investment decisions made by their asset managers, says the report.

Additionally while markets have improved, the pressure from both institutional and retail investors for performance and transparency has not let up. Furthermore, product dynamics, many of which were observed before the crisis began, continue to shift. One key ongoing trend is the faster growth of passively managed and alternative products, compared with actively managed products, says the report.

Unsurprisingly, the increasing role of regulation aimed at clients - forcing asset managers to adjust and upgrade their services, which often leads to raising costs - may have a bigger impact on the industry than regulation aimed at asset managers themselves, the report notes.

In terms of regional markets the research predicts that mature markets such as North America, Europe, Australia, and Japan are likely to grow at a modest pace overall. Meanwhile developing markets such as Latin America and many parts of Asia will likely grow at a faster pace, albeit from a much lower base of regional and domestic AuM, says the report.

In order to pursue growth in home markets asset managers need to take “concrete steps,” including developing “crystal-clear” value propositions, which the report says can be a true differentiator amid virtually limitless investment choices. This means that the focus increases on the end customer as “relatively few asset managers have fully exploited opportunities to better understand what private investors really want in terms of products, services, and preferred channels."

Outside home markets asset managers need to first develop a clear view about which markets they would like to enter given their current capabilities and resources, says the report. Equally important, says BCG, asset managers need to accurately assess the level of competition in the new market and must decide where they do not want to be in terms of regions, products, and client segments.

“Surprisingly some asset managers begin their foreign-expansion initiatives without fully addressing these basics,” says Kramer.

As higher overall profitability has contributed to slower consolidation among asset managers, says BCG, there have been fewer large deals since the beginning of 2010 than there were in 2009. The report says the process of consolidation will still continue.