Profits for fund management groups shrank by around a third in 2001 as continued stock market underp...
Profits for fund management groups shrank by around a third in 2001 as continued stock market underperformance ate into margins.
While institutional inflows rose year on year, pushing overall funds under management up by 2.3%, versus a 0.8% increase last year, net inflows of higher margin, new retail money halved to 6% of assets under management in 2001, according to research by PriceWaterhouseCoopers.
Income from retail front-end charges also fell by 46%, although this was partially offset by a corresponding 37% reduction in commission paid to intermediaries. Larger players have been the worst hit, with annual management income down and net revenues off 29%, compared to a 4% decline in boutiques' revenues and increases in annual management fee revenue.
David Jane, manager of the M&G Global Financials fund, said smaller fund managers typically have more flexible cost bases and outsource many of the more labour intensive aspects of the industry, such as back office.
Jane said: 'In general the industry is structured to reflect the past 10 years, when you had strong markets and inflows, rather than the next 10 years. If growth moves more slowly over this decade, the industry's cost structure is much too high.'
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