Strategy& – Asset Management, 2023

In the intro to Strategy& - Asset Management, 2023, the authors highlight the challenging year experienced by markets in 2022, which saw the MSCI World Index decrease by 18%. This decline was primarily attributed to increased uncertainty, rising inflation, fears of recession, and central bank rate hikes. As a result, the asset management industry also faced significant setbacks, with assets under management dropping by 11% on average, along with decreases in revenues by 15% and profits by 16%. To combat profitability pressure and reduce costs, the authors suggest various options that asset managers can consider. These include optimizing IT systems, downsizing operations, or streamlining their portfolio of offerings. These measures could help organizations adapt to the challenging market conditions and improve their financial performance. However, amid these cost-cutting initiatives, there is also the potential for asset managers to leverage the power of generative artificial intelligence (AI). The authors propose that this technology could significantly decrease costs for asset managers in the medium term, potentially by up to 15%. By harnessing generative AI, asset managers could enhance operational efficiency and reduce expenses, thereby improving their overall financial performance. Overall, the intro highlights the market downturn in 2022 and the subsequent challenges faced by the asset management industry. It proposes several strategies for asset managers to address profitability pressure and discusses the potential of generative AI to reduce costs in the medium term.