Casey Quirk Outlines How to Create a Winning Asset Management Firm for the Future

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Aug 14, 2023, 09:05 ET

New research shows successful asset management firms consolidated market share dramatically over the decade following the Global Financial Crisis

NEW YORK and STAMFORD, Conn., Aug. 14, 2023 /PRNewswire/ -- In new research released today, Casey Quirk, a leading strategy consultant to the global asset management industry and a Deloitte Consulting LLP business, found that winning asset management firms consolidated market share dramatically in the 10 years following the Global Financial Crisis (GFC), and the approach and decisions made by winners can be applied in today's environment.

In the new research entitled "An industry rearranged: Winning asset managers lessons for the post-pandemic era," Casey Quirk analyzed the performance of 50 of the largest asset managers globally in the decade following the GFC. Among this group of 50, representing 55% of the industry's total revenues in 2009 and more than 60% by year-end 2019, the winning asset managers grew their total industry revenue share from 24% to 32%. Winning firms, defined as those that grew net new revenues (revenues associated with positive net flows) at a rate greater than the industry average for the 10-year period, amounted to about 20 firms in total.

These firms also exhibited superior financial performance in other critical financial metrics that have helped separate them from the pack – they grew annual dollar profits at a 10% rate (vs. 8% for others in the sample) over the 10-year period, exhibited 1.3X higher productivity as of year-end 2019 and were investing 2% more of their revenues per year in technology as of year-end 2021. Interestingly, winning firms varied in size and type – alternatives, passive, fixed income and solutions-focused firms, for example, were all represented.

Casey Quirk's research found that the winning firms shared three primary ingredients and concludes that winners in the post-pandemic era are likely to also share the same characteristics. The winning asset managers are:

Better investing in growth – the most impactful differentiator for winning firms is the ability to better target and harness growth tailwinds either organically or via M&A.
Modernizing their operating models more quickly – winning firms modernize their operating model by re-thinking how and where work gets done, leveraging third parties smartly and building their data infrastructures to maximize insight.
Instituting financial discipline – winning firms institute robust financial disciplines and tools to redirect investment toward growth.

"Secular patterns of the past decade – passive investing, institutional demand for privates, the need for solutions and the rise of the individual investor, for example, seem certain to continue as important growth drivers," said Kevin Quirk, principal at Casey Quirk. "However, expansion rates in these areas will slow and the changing environment, which is sure to have a long-term effect on the investor mindset, will reveal new growth tailwinds. Recognizing these tailwinds will be important for asset manager growth in this next decade."

Casey Quirk's research noted that winning firms universally establish a differentiated brand of investments leadership, invest in an outstanding client experience and better execute on business transformation. The research also found that a key lever asset managers can pull to become a winning firm of the next decade is optimizing people expenses, which account for 75% of most asset managers' cost structures.* This effort includes automating processes and employing offshoring, nearshoring and outsourcing. Finally, in a period of market volatility and increased pressure on revenues and profits, successful firms will place greater emphasis on creating a fit-for-purpose operating model through robust financial management and strategic reinvestment.

"The best firms have and continue to modernize their operating models by investing significantly more in data and technology," said Jeff Levi, principal at Casey Quirk. "Winning asset managers spent 2.8% more of their revenue on technology and data than other firms in the decade following the GFC and we expect the future winners to similarly invest more heavily in those areas."

Casey Quirk, a business of Deloitte Consulting LLP, is a leading management consultancy that focuses solely on advising asset management firms. Casey Quirk was established in 2002 and acquired by Deloitte in 2016. The organization has advised a majority of the 50 largest asset management organizations worldwide, including eight of the top 10. Casey Quirk provides senior leadership teams with broad business strategy reviews; investment positioning and strategy consulting; market opportunity evaluations; organizational design; ownership and incentive structuring; and transaction due diligence. For more information, please visit www.caseyquirk.com.

_{*According to Casey Quirk Performance Intelligence Survey}

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SOURCE Casey Quirk