IBM Business Consulting Services annual Investment Management interim update November 2002
The Investment Management (IM) survey has been published annually for the past 14 years. The most recent full survey was published in July 2002 and represented the results of 24 fund management organisations that together manage assets of around £1,100bn. This interim update of the survey was carried out in October 2002 to assess the industry's response to falling markets and covered 20 firms with around £850bn assets under management.
UK Fund Managers cut costs and improve margin on revenue to 25 per cent in a difficult market. Reversing the slide experienced last year when profits declined by a third, margin on revenue has recovered from 19 per cent to 25 per cent so far in 2002. This improvement has been brought about by a combination of cost cutting, (with absolute costs down 7 per cent on 2001) and a small increase in assets under management ("AUM"), despite market falls.
Participants who focused on structural changes to their organisations fared better and are already seeing a positive impact on their profitability in spite of the associated investment outlay. Rather than simply focusing on cost postponement, these players tackled more complex cost changes such as supplier renegotiation and re-evaluation of their business strengths. By forging new distribution alliances and launching innovative products, others were also able to buck the market trend and increase their AUM. These pioneers should be congratulated and pave the way for others to follow".
The players responsible for this turnaround have concentrated successfully on two fronts - Asset Gathering and Cost Cutting.
Recommendations for the future The successful players will be those that manage to continue to battle down costs and gather assets.
Participants who began tackling the more structural cost reduction measures during 2001, including supplier renegotiation, focusing on business strengths and outsourcing/joint venture activities are already seeing a more positive impact on their profitability despite the investment
normally associated with these actions. This should continue.
The challenge continues to be one of adapt or die: Fund managers need to determine which markets and clients to focus on and how in terms of alliances and outsourcing they need to deliver profitable growth. Concentrating on strategies to "fix" the short-term issues facing the business may be to the detriment of positioning for medium-term potential.
This study identifies the rapidly emerging demand for outsourcing from the largest product providers in the life and pensions industry. This reflects a realisation by these companies that they need to radically reassess their operating models to counter growing pressures on their businesses, which have been accentuated further by recent sharp declines in equity markets. These pressures have started to place substantial pressure on solvency margins across the industry.
About The Investment Management survey
The Investment Management survey has been published annually for the past 14 years. PwC Consulting, part of PricewaterhouseCoopers, previously ran the Investment Management survey. In October 2002, IBM purchased PwC Consulting and IBM Business Consulting Services was created. IBM Business Consulting Services will continue to publish both annual and interim surveys. The most recent full survey was published in July 2002 and represented the results of 24 fund management organisations that together manage assets of around £1,100bn. An interim update of the survey was carried out in October/November 2002 to assess the industry's response to falling markets. This updates covered 20 firms with around £850bn assets under management.
About IBM Business Consulting Services
With more than 60,000 consultant and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world's largest consulting services organisation. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build and run those solutions in a way that delivers bottom-line business value.
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