More than three in four asset management chief executives anticipate growth in the sector over the next 12 months while 86 per cent predict growth over three years, PwC’s 16th Annual Global CEO Survey has found.
Chief executive officers are looking to markets such as India and China for growth
While asset management chief executives’ outlook for the global economy remains gloomy – only 18 per cent expect it to improve in the next 12 months and just over half expect it to stay the same – this represents an improvement over last year.
In 2012, 44 per cent of CEOs voiced “extreme concern”. While fiscal difficulties in Europe and the US are not expected to disappear overnight, CEOs anticipate a positive resolution is on the horizon.
PwC conducted 1,330 interviews in 68 countries during the last quarter of 2012: 449 interviews were conducted in Asia Pacific, 312 in Western Europe, 227 in North America, 165 in Latin America, 95 in central and Eastern Europe, 50 in Africa, and 32 in the Middle East. In total, 108 asset management heads were interviewed.
“The asset management sector continues to grapple with volatile and unpredictable markets, unremitting regulatory changes that impose significant costs and new risks, together with investors demanding enhanced returns and greater transparency,” PwC Malta’s asset management leader Joseph Camillerisaid.
“Each of these factors creates its own set of challenges and increases business complexity. Asset management CEOs need to understand the potential implications of the complex changes taking place in their markets and adapt accordingly.”
The largest proportion of CEOs (39 per cent) sees organic growth in their domestic markets as offering the greatest immediate potential. But reflecting the strategic challenges they face, many are also looking to deploy more fundamental measures such as mergers, joint ventures, strategic alliances or establishing new operations in foreign markets.
The survey found 58 per cent of asset management CEOs planning an acquisition, joint venture or strategic alliance in 2013 – by comparison, only 32 per cent and 49 per cent of their banking and insurance peers respectively plan such radical courses of action.
Additionally, 35 per cent of asset management CEOs are also planning to divest businesses – showing how they’re shuffling their product capabilities to meet investors’ changing requirements.
CEOs are looking to markets such as India and China for growth, whether through setting up local operations or attracting assets from local institutional investors such as sovereign wealth funds.
They have highest hopes for the Middle East, India, Latin America, China and southeast Asia. Reflecting its economic difficulties, western Europe is the region from which they expect least.
Volatile economic growth and government austerity policies remain the biggest economic and policy threats to growth, according to 81 per cent and 77 per cent of CEOs respectively, while 71 per cent of CEOs name over-regulation as a threat.
Regarding potential business threats to growth, the greatest proportion of CEOs, 55 per cent, considers the increasing tax burden as the biggest threat, while a sizable minority (46 per cent) see a talent shortage as an issue.
Interestingly, 44 per cent of chief executives voiced concern about lack of trust in the asset management industry and are reacting by ensuring new products also provide features that reduce risk and protect their investors against uncertainty.
Asset management CEOs view talent management as an increasingly important area for refining strategy, with 73 per cent of those CEOs planning to change strategy anticipating doing so in this area.
New models for remunerating investment professionals are emerging, just as the importance of culture and in-house talent development is increasing.
More than 50 per cent are planning to hire more people in the coming year. These jobs are most likely to be front office positions such as portfolio management and sales roles.