Martin Gilbert To Asset Managers: Adapt or Perish

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The former CEO and co-founder of Aberdeen Asset Management gives his perspective on the current state of the asset management industry.

Martin Gilbert sees the current state of the game in the industry as awash with commoditized products and if companies, especially mid-sized companies, don’t adapt they will become history, the current president of Revolution and AssetCo wrote in a comment in “Financial news» (behind a paywall).

One of the problems with the industry, says Gilbert, is that “much of it is commoditized and inundated with products that are almost identical in terms of investment approach and performance.”

Importance of scale

There are currently 200 asset managers with assets under management (AUM) of €50 billion ($53.4 billion) or more, of which the top ten have a market share of 36% and the top 25 account for 56%, he wrote, citing a recent analysis by “Numis.”

For Gilbert, this illustrates “the importance of scale or, alternatively, of being a small company focused on offering a small number of strategies”. This leaves companies that are caught in the middle facing the greatest risk that does not include “significant structural changes underway”.

Active vs Passive

Among these structural changes are the shift from active investing to passive investing, from public markets to private markets, increased regulatory oversight, downward pressure on fees, or changing focus on investors. individuals rather than institutional investors, wrote Gilbert.

Given this, weaker midstream companies will either be acquired or come under continued pressure from more nimble competitors, new market entrants, or gobbled up by a bigger company, Gilbert warned.

Adapt business models

Survival depends on adapting business models and product offerings, which could involve “right-sizing” the business, shedding less profitable units, or integrating complementary investment offerings into existing ones.

In the end and above all, “they will have to pay constant attention to customers. These non-acting asset managers will be history within five years,” predicts Gilbert.

Retire in 2020

Gilbert was co-founder of Aberdeen Asset Management in 1983 and served as CEO from 1991 until 2017 when it merged with Standard Life and became Standard Life Aberdeen. In this entity, Gilbert was co-CEO and vice-president until his retirement in 2020.

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