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At first glance, the asset management business hardly seems to be in need
of any serious retooling. Assets under management are growing at a double-digit
rate and earnings performance remains rock-solid. The results of the most
recent benchmarking study conducted by McKinsey and Institutional Investor's
U.S. Institute reveal that asset managers generated an average pre-tax margin of
31 percent in 2005, an impressive 5-year high.
But below the numbers is a different picture. Our research shows that a full 41 percentage points of operating margin now separates the top- and bottom-third players, a disparity that has widened significantly over the past 3 years. Moreover, an increasing proportion of asset managers are now earning margins under 20 percent, as the bottom tier performers fall further behind the rest of the pack.
Unless these players move quickly to revamp their business models, the profit gap is almost certain to expand even further.
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| | Financial Services Practice | |
| |  | The Asset Management Industry: A Growing Gap Between the Winners and the Also-Rans |
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