Headline: "Asset Managers Face Profitability Pressure Through 2028"

A recent study by zeb Consulting revealed that asset managers, including industry giants like BlackRock (NYSE:BLK), State Street (NYSE:STT), JPMorgan, and Goldman Sachs, are experiencing a decline in profitability, with this trend expected to persist for several more years. Analyzing the financial performance of 40 global asset managers, the study found that profits fell to 8.2 basis points or 0.082% of assets under management in 2023, down from 10.1 basis points in 2021 and 9.4 basis points in 2022.

A senior consultant at zeb and one of the authors of the study commented on Monday, saying, "The good years are over for now." The research highlighted that despite these firms seeing an average annual growth of 8.8% in assets under management over the past five years, their operating profits increased by a modest 0.7% per year.

The study projects that the decline in profitability for asset managers will continue, predicting profits could fall to as low as 5.5 basis points of assets managed by 2028, and possibly even drop to 3.9 points. In a more optimistic scenario, profits could rise to 9.1 basis points.

A key factor contributing to the pressure on profitability is the shift in investor preferences towards lower-fee products like exchange-traded funds (ETFs). Additionally, there has been a noticeable shift of money from equity funds to bond funds in recent years with rising interest rates, which typically results in lower profits for asset managers.

Mid-sized asset managers, with assets under management ranging from 370 billion euros to 1.5 trillion euros, are particularly affected. These firms are often too large to offer high-yield niche funds and too small to compete in the ETF market. According to Hamelius, this pushes these firms to seek growth through mergers, accelerating consolidation in the industry.