Asset management undergoing competitive realignment: Deloitte
Increased consolidation, a swifter shift to passive investing and changes to fund flows brought by an ageing population will lead the asset management industry's "largest competitive realignment" up to 2020, according to a report by Casey Quirk, a subsidiary of Deloitte Consulting. Market share will be won by the companies that have the best distribution networks and who invest most wisely in technology, the consultant said. The industry will be "increasingly shaped by the same winner-take-all dynamics influencing other maturing financial services sectors," it added. 
Asset management will experience its "largest competitive realignment" over the next three years as the industry continues its increasing rate of mergers and acquisitions.

Forty-four M&A deals took place in the first quarter of this year, and an industry consultant expects 2017's volume to likely outpace the last two years.

Casey Quirk, a subsidiary of Deloitte Consulting, said ageing populations are affecting asset management flows and the broad shift to passive management has created pressure on industry fees.

This has placed greater value on firms with valuable distribution networks and those investing in technology, the consultant said in its latest white paper.

Casey Quirk principal and investment management lead strategist Ben Phillips said the asset management industry has become fiercely competitive and "increasingly shaped by the same winner-take-all dynamics influencing other maturing financial services sectors."

"Amid this challenged marketplace, the gap is widening between leading and lagging asset and wealth management firms. Unlike deals of the past, consolidation pressures, with a focus on scale, will likely drive the next round of M&A activity to position firms for growth," Phillips said.

Deloitte Risk and Financial Advisory managing director, Deloitte & Touche, Masaki Noda said: "Economic pressure, distributor consolidation, the need for new capabilities, and a shifting value chain are the catalysts that are fueling M&A activity."

In 2016, 133 mergers and acquisitions occurred in the asset management and wealth management industries. This was down slightly from 145 in 2015, but with a higher average deal value (up from US$240.9 million in 2015 to US$536.4 million last year).

In investment management, about half of the deals rose from the need to add capabilities such as innovative investment strategies or access to new market segments.

In wealth management, the vast majority of transactions - 64 out of 78 - resulted from consolidation, as various smaller wealth managers sought to improve profitability through economies of scale.