Are asset management companies too
profitable? That was the question asked in late
2016 when regulators probed the competition in
the UK’s asset management sector.
It was a fair query given firms generated an astonishing
operating proft margin of 36 per cent in the five
years to 2015. To put that into perspective, the
equivalent fgures for Facebook, Microsoft and
Alphabet are 34, 33 and 26 per cent respectively.
Similarly, investment managers in Europe more
broadly returned margins of 29 per cent,
comparable to tobacco stocks (27 per cent) and
pharmaceuticals (22 per cent).
Yet this may be the wrong question to ask
given the four horsemen currently stalking the
proftability of the industry. With threats from the
rise of passive products, regulation, technology
and a possible downturn on the horizon, active
investment is already on its way to becoming
signifcantly less profitable.