Managed Assets to grow to $ 1.3 trillion in India
mebbe some people would like to read this article.
Boston Consulting Group says that fund managers must take forceful initiatives to improve the integrity of their businesses if they hope to remain competitive
Global asset managers, despite overall positive trends in the value of the funds they manage, must take forceful initiatives to improve the integrity of their businesses if they hope to remain competitive as industry dynamics shift in step with demographic patterns, according to a new report by the Boston Consulting Group (BCG). The new report 'Playing the Long Game: Global Asset Management 2006' examines the current state of the industry, offers a detailed analysis of the market for retirement assets, and outlines specific actions that asset managers can take if they seek both to raise profitability and achieve a leadership position in the industry. The global management-consulting firm estimates the current managed assets in India to be about US$170bn and predicts this to grow exponentially to about US$1.3 trillion by 2015. This includes the major elements - domestic mutual funds, international funds invested in India, private banking including PMS, unit linked insurance and pension funds. BCG believes this opportunity will grow exponentially. In fact, managed assets excluding pensions are expected to grow by about 10 times over the next decade, says Alpesh Shah "The potential of the Indian market is attracting many new entrants and this is likely to continue over the next five years," he said. In order for the Indian asset managers to do well, BCG has identified the five commandments for success, which are: 1. to reach out to the full India potential by going beyond the top eight cities 2. development of the international opportunity 3. new product innovation to fill out the key category gaps and address adjacent spaces 4. to optimise distribution including developing alternate channels 5. to build a global brand "India is a very attractive opportunity and ultimately," says Shah. "The players that get their act together on these five commandments in addition to the table stakes of solid investment performance will be the biggest winners." According to the BCG report, which is based on a study of 28 national markets, the value of professionally managed assets - those for which a management fee is paid - grew by around 15% globally to US$49.1 trillion in 2005, with capital inflows driven largely by growth in Europe and Asia. Assets Under Management (AUM) in both Europe and the Asia-Pacific region grew by more than 20% in nominal terms, compared with 9% in the United States. The US market nonetheless remains the largest in the world, with more than US$22 trillion in AUM. BCG says that asset managers, in order to improve the integrity of their overall businesses, must optimize distribution networks, enhance segment and asset-class expertise, explore the development of innovative products, foster investment-manager autonomy, enhance scale, and continue to hammer away at cutting costs. A highly disciplined approach to distribution will be particularly critical because the bulk of power and influence in the industry is continuing to shift away from manufacturers toward distributors and intermediaries that control customer relationships, according to the consulting firm. In order to improve competitiveness specifically in the market for retirement assets, players need to redefine their product portfolios, broaden advisory capacity, invest more in the customer experience, sharpen risk-management capabilities, and vigilantly keep up with regulatory shifts, says the report. The report notes that traditional core businesses of actively managed equity, bond, and money market funds are coming under increasing pressure, says the report. Although revenue margins have showed relative stability since 2004 - at around 45 to 50 basis points for equity funds and 15 to 20 basis points for bond and money market funds - asset growth across the core is expected to stay in the middle single digits over the next few years, it adds. By contrast, asset growth should be stronger in non-core offerings. These include commoditised products such as index funds and exchange-traded funds, as well as alternative investments such as hedge funds and private equity. Hedge funds assets, which generate revenues in the 150-to-200 basis-point range, already exceed US$1 trillion and are expected to grow by 15% annually as declining minimum-investment requirements bring hedge funds more into the asset management mainstream, the report says.
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Boston Consulting Group says that fund managers must take forceful initiatives to improve the integrity of their businesses if they hope to remain competitive
Global asset managers, despite overall positive trends in the value of the funds they manage, must take forceful initiatives to improve the integrity of their businesses if they hope to remain competitive as industry dynamics shift in step with demographic patterns, according to a new report by the Boston Consulting Group (BCG). The new report 'Playing the Long Game: Global Asset Management 2006' examines the current state of the industry, offers a detailed analysis of the market for retirement assets, and outlines specific actions that asset managers can take if they seek both to raise profitability and achieve a leadership position in the industry. The global management-consulting firm estimates the current managed assets in India to be about US$170bn and predicts this to grow exponentially to about US$1.3 trillion by 2015. This includes the major elements - domestic mutual funds, international funds invested in India, private banking including PMS, unit linked insurance and pension funds. BCG believes this opportunity will grow exponentially. In fact, managed assets excluding pensions are expected to grow by about 10 times over the next decade, says Alpesh Shah "The potential of the Indian market is attracting many new entrants and this is likely to continue over the next five years," he said. In order for the Indian asset managers to do well, BCG has identified the five commandments for success, which are: 1. to reach out to the full India potential by going beyond the top eight cities 2. development of the international opportunity 3. new product innovation to fill out the key category gaps and address adjacent spaces 4. to optimise distribution including developing alternate channels 5. to build a global brand "India is a very attractive opportunity and ultimately," says Shah. "The players that get their act together on these five commandments in addition to the table stakes of solid investment performance will be the biggest winners." According to the BCG report, which is based on a study of 28 national markets, the value of professionally managed assets - those for which a management fee is paid - grew by around 15% globally to US$49.1 trillion in 2005, with capital inflows driven largely by growth in Europe and Asia. Assets Under Management (AUM) in both Europe and the Asia-Pacific region grew by more than 20% in nominal terms, compared with 9% in the United States. The US market nonetheless remains the largest in the world, with more than US$22 trillion in AUM. BCG says that asset managers, in order to improve the integrity of their overall businesses, must optimize distribution networks, enhance segment and asset-class expertise, explore the development of innovative products, foster investment-manager autonomy, enhance scale, and continue to hammer away at cutting costs. A highly disciplined approach to distribution will be particularly critical because the bulk of power and influence in the industry is continuing to shift away from manufacturers toward distributors and intermediaries that control customer relationships, according to the consulting firm. In order to improve competitiveness specifically in the market for retirement assets, players need to redefine their product portfolios, broaden advisory capacity, invest more in the customer experience, sharpen risk-management capabilities, and vigilantly keep up with regulatory shifts, says the report. The report notes that traditional core businesses of actively managed equity, bond, and money market funds are coming under increasing pressure, says the report. Although revenue margins have showed relative stability since 2004 - at around 45 to 50 basis points for equity funds and 15 to 20 basis points for bond and money market funds - asset growth across the core is expected to stay in the middle single digits over the next few years, it adds. By contrast, asset growth should be stronger in non-core offerings. These include commoditised products such as index funds and exchange-traded funds, as well as alternative investments such as hedge funds and private equity. Hedge funds assets, which generate revenues in the 150-to-200 basis-point range, already exceed US$1 trillion and are expected to grow by 15% annually as declining minimum-investment requirements bring hedge funds more into the asset management mainstream, the report says.
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