The report shows that the respondents anticipate increased costs, competition and hastened mergers and de-mergers that will arise from increased regulations, with 70 per cent of them expecting the industry to become more polarised, which would amplify the dominance of large players within one of three scenarios: commoditisation, vibrancy or segmentation.

“Asset managers need to create a new narrative on what they stand for and what they deliver, at a time when regulatory client drivers remain uncertain…one point is clear: a business model which cannot absorb further market shocks will be untenable, since further turbulence cannot be ruled out,” commented Professor Amin Rajan, CEO of CREATE-Research.

Thirty-four per cent of respondents believe the industry would become commoditised as a result of increased regulation and risk aversion on the part of clients. On the other hand 17 per cent of those surveyed foresee the industry becoming more vibrant with increasingly closer interests shared between clients and asset managers.

The majority of respondents (49 per cent), however, anticipated the scenario of a fragmented industry defined by consolidation, separate centres of excellence that best serve different client segments and middle and back offices that would allow a larger concentration of capability. A significant percentage argues this is already taking place and will continue.

“Clients of all kinds have been badly burnt…and are now demanding all-weather products, which place capital protection at the core. Those asset managers who understand and cater to their clients’ risk appetite and changing needs…will stand at the vanguard of the industry, when markets recover,” Rajan added.

- Pensions Age June 2009