A look at some of the findings from PwC's latest Global CEO Study as they pertain to the asset management sector.

Asset managers are looking for ways to “redefine” their businesses by moving into new growth areas and exploiting digital technology, according to a recent global report by PricewaterhouseCoopers.

The asset management section of PwC's 18th Annual Global CEO Survey is based on answers from 155 CEOs in 46 countries.

The report said a number of “powerful trends” are currently transforming the industry.

Namely, the growth of exchange-traded and passive funds has led 46 per cent of asset manager CEOs to consider cutting costs in 2015 (click here for an article about the growing use of ETFs in the RIA sector). Other factors include emerging markets garnering more wealth and regulatory burdens adding to cost pressures.

As highlighted by Barry Benjamin, global asset management leader at PwC, there is “never a time when all the variables are completely positive or negative.”

“Opportunities exist because of some of the mega trends, but there will also be challenges for those asset managers that don't have a strategy to succeed in high-growth areas,” Benjamin said.

Growth hotspots

Respondents rated China and the US as the most important countries for growth prospects in 2015 and, according to PwC, “there are good reasons for this finding.”

“In our experience, asset managers regard China as having strong potential for high growth and are keen to establish their brands in the country,” it said. “By contrast, the United States remains the world’s largest asset management market, although its maturity means firms wishing to grow might have to do so through acquisition.”

Mirroring this, a fifth of the asset manager CEOs surveyed said they plan to grow through a cross-border merger and over a quarter (29 per cent) through a domestic merger in 2015.

However, differences between the expectations of buyers and sellers has meant that M&A in the asset management sector has been harder to execute since the financial crisis, PwC said. “Whether this gap narrows depends on whether financial markets perform well and buyers are prepared to pay more.”

New strategies

Asset managers are “finding new, innovative ways to grow,” with 28 per cent reporting that they have entered a new industry over the past three years and a further 18 per cent saying they had looked into doing so.

“Most were targeting financial services, including real estate,” PwC said. “As banks have deleveraged over the past few years, partly due to regulation, PwC has seen asset managers disrupting banking by, for example, acquiring portfolios of real estate loans and lending to corporates,” it added.

Asset managers are also partnering “more widely” in a bid to access more opportunities, according to the report.

And while they have not embraced digital technologies as much as their banking peers, a significant proportion regard related developments as strategically important in areas including data mining and analysis (78 per cent), cyber security (77 per cent) and mobile tech for client engagement (71 per cent).

Disruption

While asset managers – unsurprisingly – reported being concerned about the impact of regulatory changes, they also acknowledged that improved cooperation in this respect is boosting cross-border capital flows.

Beyond this, they are worried about client behavior.

“Already the shift towards no-frills, low-cost ETF and passive products is causing active asset managers to lose market share and putting their fee models under pressure,” PwC said. “With the population aging, there's growing demand for fixed income and income-generating assets.”

It added: “Either asset managers need to have ETF/passive products in their portfolio of businesses or they must know how they’ll counter this threat.”

Meanwhile, outside of their sector, asset management CEOs see technology and financial/business services as their biggest competitors. Indeed, much noise has been made in recent months about the perceived threat of “robo-advisors” on the wealth management sector through the automation of asset allocation.