The tables are turning for the largest players in
For years, asset management firms have benefited as the
banking industry was dragged down by quantitative easing and
increasing regulation. This one-two punch spurred a more than
$100 billion divergence in revenues since 2011, with asset
managers up $65 billion and wholesale banks down $45 billion at
the end of 2016, according to
new research from Morgan Stanley and Oliver Wyman.
But now, with asset managers facing intense
pressure on fees and with economic policy shifting in favor of
banks, the two firms predict a reversal of fortunes
for the two sectors.
In their joint report, Morgan Stanley and Oliver Wyman
forecasted a $15 billion increase in revenue for wholesale
banks over the next three years as a result of regulatory
easing and rising rates. Simultaneously, they expect a $9
billion decline for asset management firms as falling margins
outweigh gains from modest growth in assets under
For asset managers, these pressures will trigger cost cuts
and consolidation, as well as force managers to rethink their
business models. The researchers predicted a
re-engineering of active asset management as seizing
alpha opportunities becomes more critical than ever,
including growth in high active share funds, unconstrained
strategies, and risk factor approaches.
Banks, meanwhile, are expected to further capitalize on the
growth opportunities presented by changing economic policy
through implementation of new cost-cutting technology.
Potential easing of capital requirements could also drive
growth in capital-intensive activities. The evolution of the
industrys revenue base will continue, with earnings
increasingly stemming from corporate clients as asset managers
In the reports best-case scenario, larger fiscal
stimulus, corporate tax reform, and deregulation could drive
wholesale bank revenue up 7 percent per annum between now and
2019. However, should new policies fail to deliver, banks could
experience a boom and bust and see revenues fall 8
percent annually over the same period.
Asset managers, meanwhile, could see a 30 percent drop in
revenue by 2019 in a worst-case scenario where economic growth
fails to materialize. However, should growth accelerate,
boosting confidence and assets under management while lessening
fee pressure, Morgan Stanley and Oliver Wyman projected a
best-case outcome of 17 percent growth in revenue.