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RECOVERING FROM THE STORM: THE NEW ECONOMIC REALITY FOR U.S. ASSET MANAGERS

After a quarter century of largely uninterrupted growth and profitability, the recent economic and financial crisis has challenged asset managers in ways not seen in generations. While markets recovered to year-end 2008 levels during the summer of 2009, it is worth recalling that in 2008 the S&P 500 experienced the second-largest contraction in its history, rivalling the catastrophic losses of the Great Depression. The market downturn caused net flows to long-term mutual funds to turn negative for the first time since the 1970s, raising questions about the lasting impact on the US investing culture.

‘Recovering From The Storm’, McKinsey Financial Services Practice
McKinsey & Company, 30 pages, 2009

MCKINSEY & COMPANY 2009 ASSET MANAGE-MENT SURVEY: WILL THE GOOSE KEEP LAYING GOLDEN EGGS?

Asset managers are focusing on rebuilding profitability after a turbulent 2008 and a tough 2009. Amid tightening regulations, the ‘new normal’ raises the bar in distribution, and asset managers must adapt to a more challenging environment.

For further information, please contact:
John Cheetham, McKinsey & Company, London
john_cheetham@mckinsey.com, Tel: + 44 207 961 5294 

LESSONS FROM CHANGE: RESTORING TRUST IN THE ASSET MANAGEMENT INDUSTRY

A year after the collapse of Lehman Brothers, the asset management industry struggles to adapt to a changed world. The global credit crunch had catastrophic effects on every segment of the asset management industry. Most businesses had to cope with only a few quarters of declining sales, whereas asset management saw 40% of its entire value plunge. Client portfolios were decimated and revenue streams savaged in just a few horrendous months. Now, the survivors have begun the hard work of rebuilding their business in a changed world.

‘Lessons from change: Restoring trust in the asset management industry’
Ernst & Young, 32 pages, 2009 

THE 2009 ERNST & YOUNG BUSINESS RISK REPORT – ASSET MANAGEMENT

The crisis experienced in the financial market during 2008 has had a dramatic impact on asset management. Understanding and mitigating market risks is placing great pressure on managers as they seek to deliver value for investors. The financial crisis will force asset management to address the challenges in this report
head-on and at an early stage in order to manage the challenges effectively and transform them from risks into opportunities.

‘The 2009 Ernst & Young business risk report – Asset Management’
Ernst & Young in association with Oxford Analytica, 24 pages, 2009

UCITS IV – WHICH BUSINESS MODEL FOR TOMORROW?

Markets are now set to embrace the latest phase of UCITS development with the implementation of UCITS IV in July 2011. While this process is still at an early stage, preparations for its introduction have created a raft of detailed new regulations and involved considerable industry consultation and participation. This report is based on a major RBC Dexia Investor Services/KPMG study assessing the likely impact of UCITS IV on the asset management industry. The purpose of the study was to gather opinions from a broad range of asset managers six months after the final text of the new UCITS IV Directive was approved by the European Parliament.

‘UCITS IV: Which business model for tomorrow?’
KPMG & RBC Dexia Investor Services, 39 pages, 2009

FINANCIAL CRISIS MANUAL: A GUIDE TO THE LAWS, REGULATIONS AND CONTRACTS OF THE FINANCIAL CRISIS

The Davis Polk ‘Financial Crisis Manual’ has been written for anyone who wants to understand the flurry of new legislation, old law used in new ways, contracts with Treasury, press releases, frequently asked questions, guidelines and other rulemaking that has occurred at a dizzying speed over the last year and a half as a result of the financial crisis. This Manual attempts to describe these US financial crisis laws as they relate to financial institutions and is also meant to be, through the hyperlinks in each chapter, a reference work gathering in one place the scattered primary sources of financial crisis laws.

‘Financial Crisis Manual: A Guide to the Laws, Regulations and Contracts of the Financial Crisis’
Davis Polk, 279 pages, 2009

MANAGING RISK IN PERILOUS TIMES: PRACTICAL STEPS TO ACCELERATE RECOVERY

‘Managing risk in perilous times: Practical steps to accelerate recovery’ is a briefing paper written by the Economist Intelligence Unit and sponsored by ACE, KPMG, SAP and Towers Perrin. The findings are based on two main strands of research:
• A programme of desk research, conducted by the Economist Intelligence Unit, which examined current academic and industry thinking around risk management, with a particular focus on financial institutions.
• A series of interviews in which senior risk professionals, financial services participants and academics were invited to give their views. In some cases, interviewees have chosen to remain anonymous.

‘Managing risk in perilous times’
The Economist Intelligence Unit Limited 2009, 22 pages, 2009

CONQUERING THE CRISIS: GLOBAL ASSET MANAGEMENT 2009

by Kai Kramer, Brent Beardsley, Monish Kumar, Andy Maguire, Philippe Morel, Tjun Tang and Hélène Donnadieu
Boston Consulting Group has released this publication with the following introduction: “The asset management industry has been at the core of the global financial crisis. Declining financial markets and a lack of transparency regarding the risks of certain products have prompted some investors to question the judgment of the people who manage their money. This July 2009 report provides a detailed analysis of the dilemmas that asset managers currently face, and offers concrete solutions to help them weather the crisis and emerge well-positioned for the future.”

‘Conquering the Crisis: Global Asset Management 2009’, BCG publications
The Boston Consulting Group, 32 pages, July 2009

WINDS OF CHANGE: FIRST-HALF 2009 M&A ACTIVITY IN THE GLOBAL ASSET MANAGEMENT, BROKER/DEALER, AND FINANCIAL TECHNOLOGY INDUSTRIES

In this August 2009 report, New York investment banking group Jefferies Putnam
Lovell describe the trends they expect to see in financial services mergers and acquisitions over the next twelve months. “With the capital markets recovering and investor fears receding, M&A activity will be fuelled more by buyers seeking to grow than by sellers anxious to survive,” it predicts. The report outlines a number of other likely trends driven by the “growing confidence that the worst of the economic crisis has passed.”

‘Winds of change’, Jefferies Putnam Lovell Strategic Insight reports
Jefferies Putnam Lovell, 2009

RAPID AND SUSTAINED COST MANAGEMENT

In this publication, Accenture consultants question how successful companies achieve high performance during times of economic turmoil. It lists the challenges that companies face as: “relentless competition, increased earnings expectations, complex global operations, regulatory compliance, efficiency imperatives, proliferating risks and the sheer speed of change.” The web link below leads to a series of downloadable documents and podcasts on the theme of cost control and management.

‘Rapid and Sustained Cost Management’
Accenture Consulting, 2009

STRATEGIC COST MANAGEMENT: PROTECTING PROFITS AND ENHANCING BUSINESS PERFORMANCE IN A TURBULENT ECONOMIC ENVIRONMENT. WHY COST CUTTING GOES WRONG

Along similar lines to the Accenture document, KPMG says, “Even in the good times, many organisations make a poor fist of managing their costs. They are unlikely to get better at it just because business conditions have become a lot tougher.” This KPMG study entitled ‘Rethinking Cost Structures’ undertaken with the Economist Intelligence Unit, found that nine out of ten of the companies examined were, by their own admission, failing to optimise their cost reduction efforts.

‘Rethinking cost structures’, KPMG & Economist Intelligence Unit
KPMG Australia, 2009

AR COST MANAGEMENT IN A DOWNTURN: SHORT- AND LONG-TERM STRATEGIES FOR DEALING WITH BUDGET PRESSURES

by Merv Adrian
The executive summary for this document says: “Top analyst relations (AR) professionals are in control of their budget, manage that spending to achieve committed objectives, and are prepared to defend and document costs accordingly. In a period of economic uncertainty, such preparation is essential to preserving AR services when executive management demands across-the-board cost cuts. Even AR teams that have yet to master their budget planning and defence can cut costs wisely by combining short-term, straightforward efficiencies with longer-term, more strategic adjustments – including reassigning certain expenses to the budgets of other stakeholders in marketing, sales, and events.”

‘AR cost management in a downturn’, Forrester Research Decision Tools
Forrester Research, 10 pages, 2009

A GLIMMER OF HOPE: GROWTH PROSPECTS IN THE GLOBAL INSURANCE INDUSTRY AND THE ESCALATION OF RISK AND CAPITAL MANAGEMENT

This June 2009, joint publication from KPMG and the Economist Intelligence Unit is the first of a two-part investigation of the prospects for growth in the insurance industry. Based on research among over three hundred insurance company executives the survey’s conclusions are generally optimistic. The second half of the report, to be released later this year, will track respondents’ attitudes to risk and capital management.

‘A glimmer of hope’, KPMG & Economist Intelligence Unit
KPMG International, 2009

THE DAY AFTER TOMORROW FOR ASSET MANAGEMENT

In this report, PricewaterhouseCoopers discusses some of the key issues facing the
asset management industry. Among these, it lists:
– Business models under stress.
– How will investors react in the post-crisis environment?
– Will fiscal pressures change the shape of the industry?
– G8, G20: A new spirit of co-operation. What will be the consequences for asset managers?
– How will the regulation impact asset managers?
These and a number of other big industry challenges are reviewed and discussed in the report.

‘The day after tomorrow for asset management’, PwC Global Day after tomorrow perspective series
PricewaterhouseCoopers, 34 pages, 2009