Firms managing $100T ‘have to change’ to attract clients

investmentnews.com:

T. Rowe Price Group Inc. is reeling from a $127 billion exodus over just two years. At Franklin Resources Inc., the latest member of a billionaire family to run the firm is trying to reverse a nearly uninterrupted 20-quarter losing streak. Across the Atlantic, the chief of Abrdn Plc has reached a blunt conclusion: merely managing mutual funds isn’t enough of a business any more.

Across the $100 trillion asset-management industry, money managers have confronted a tectonic shift in investor appetite for cheaper, passive strategies over the past decade. Now they’re facing something even more dire: The unprecedented run of bull markets that buoyed their investments and masked life-threatening vulnerabilities may be a thing of the past.

About 90% of additional revenue taken in by money managers since 2006 is simply from rising markets, and not from any ability to attract new client money, according to Boston Consulting Group. Many senior executives and consultants now warn that it won’t take much to turn the industry’s slow decline into a cliff-edge moment: One more bear market, and many of these firms will find themselves beyond repair.

“It’s a final act in that many firms that have coasted for decades will no longer be able to coast,” said Ben Phillips, head of the asset-management global advisory business at Broadridge Financial Solutions Inc. “These firms have to change, and they have to pull it off.”

More than $600 billion of client cashhas headed for the exits since 2018 from investment funds at T. Rowe, Franklin, Abrdn, Janus Henderson Group Plc and Invesco Ltd. That’s more than all the money overseen by Abrdn, one of the UK’s largest standalone asset managers. Take these five firms as a proxy for the vast middle of