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An industry re-arranged: Successful financial management in a post-pandemic era

Kevin Quirk
Tyler Cloherty
Jeffrey A. Levi
Amanda Nelson

To the point


2022 was a year of substantially down equity and bond markets, historic inflation, geopolitical instability, and recovery from a pandemic. Given this, a central question arises: As investors in the asset management industry rethink investment strategies and portfolios, how can asset managers overcome business challenges, maximize transformation opportunities, and reach financial success?

Separation from the pack: Successful financial management


The last time the industry experienced this kind of disruption was during the global financial crisis (GFC) of 2007–2009. In the decade that followed, we witnessed a critical shift in the competitive landscape that we had not seen before in the asset management industry, where a select group of winning firms leveraged the crisis to separate themselves from the pack. Our research suggests there is much to gain from this era. Our aim is to isolate the strategies that winning firms deployed and provide a useful framework to guide asset management executives today as they look toward the next decade.

The GFC: An industry inflection point


We analyzed 50 of the largest asset managers globally in the decade following the GFC. This group represented slightly more than 55% of the industry’s total revenues as of year-end 2009 and grew to slightly more than 60% by year-end 2019. But an interesting phenomenon, which we did not observe meaningfully in the periods preceding the GFC, emerged clearly in the research — winning firms captured all the net consolidation gains. Winning firms, which we define as those that grew net new revenues (revenues associated with positive net flows) at a rate greater than the industry average for the 10-year period — amounting to about 20 firms in total, grew their total industry revenue share from 24% to 32%. These firms also exhibited superior financial performance in other critical metrics, giving them a leading advantage. They grew annual dollar profits at a 10% rate (versus 8% for others in the sample) over the 10-year period, exhibited 1.3 times higher productivity (as measured by revenue per full-time equivalent) as of year-end 2019, and invested 2% more of their revenues each year in technology as of year-end 2021. Interestingly, winning firms varied in size and type, with representation from various sectors including, alternatives, passive, fixed income, and solutions-focused firms.

Figure 1: Winning firm consolidation

Three essential ingredients for success


Based on our extensive research and experience working with many of the leading firms over the past several decades, there were three essential ingredients that drove separation of the winners from the pack during the decade following the GFC: these firms (1) more effectively invested in growth, (2) were better at modernizing their operating model, and (3) instituted better financial disciplines.

Figure 2: Winning strategies

These three ingredients for success will remain largely the same in the coming decade. However, the best strategies for the next decade will need to account for both the evolving competitive landscape that has emerged since the GFC and the unique changes in the current operating environment. We are facing a very different investment environment, where business models are being redefined. The workforces is adapting to the emerging hybrid work environment, operating models are being reimagined, and the growing influence of deglobalization and fragmented regulations are increasingly challenging firms’ legacy models. Today’s changes present an opportunity for managers to recalibrate their strategy and define how they will compete to win in the next decade.

Ingredient No. 1: Targeted investment in growth

Winning firms exhibit the ability to target growth opportunities. A clear view of structural changes in the investment environment and future buyer demand shifts are central to identifying future opportunities. Coming out of the GFC, some favorable trends appeared more evident than others. Low rates and banks reducing their lending, for example, fueled growth opportunities in active fixed-income and private-market strategies. The investing experience during the GFC changed perceptions around the value of active investing, fueled by a substantial shift from active to passive investment approaches, and drove the popularity of the exchange-traded fund. The rapid growth in individual-driven markets, including retail, wealth, and retirement, rewarded firms that were best able to pivot their businesses into these segments. Winning firms successfully identified these growth trends early in the cycle, enabling them to harness superior growth.

Moving forward, leaders will separate themselves from the pack by better targeting product and market expansion opportunities, establishing a differentiated brand of investment excellence, investing in a superior client experience, and executing business transformation with precision.

Ingredient No. 2: Operating model modernization

The second substantial initiative that winning firms embraced in the decade following the GFC was a willingness to disrupt the status quo of how their businesses operated. These firms embraced new and innovative capabilities that improved their investment processes, product quality, investment returns, client experience, sales productivity, operational efficiency, client tenure, business decision-making, internal controls, and talent experience. Over the past decade, operating model changes were motivated by aspirations around growth, flexibility and business agility, improved scale, reduced cost, and risk.

Looking forward, leading firms will aggressively seek to further simplify and modernize their operating model, and align core activities with client preferences, rather than traditional business functions or products. The transformation for the next decade will tackle five priorities:

  1. Rethink work: Redesign where and how work gets done to drive efficiency and speed and reduce risk.
  2. Strategically leverage third parties: Reimagine core vs. non-core functions to make the most of external providers.
  3. Build insight: Modernize the data environment and technology stack to drive innovation, insight, and scale.
  4. CEO ownership: Leading CEOs recognize the importance of technology as a competitive advantage and own the vision.
  5. Progress over perfection: Embrace change as a normal course of business.
Ingredient No. 3: Financial management discipline

Asset management remains one of the most financially attractive industries in the world, with median profit margins exceeding 30%, very robust levels of compensation, revenue growth tied to typically rising capital markets, and high cash-flow-generating/low capital-intensive business models. However, it is these characteristics that can encourage poorly conceived spending policies. For winning firms, the decade following the GFC saw the rise of robust financial management disciplines to improve profitability and successfully free up cash flow for reinvestment. As fixed costs in the industry rose (for example, non-compensation and benefit costs have risen from representing, on average, 22% of revenues during the GFC period to more than 30% of revenues in the past five years), winning firms established a fit-for-purpose operating model, created a culture of financial accountability and stewardship, and provided a robust financial toolkit, empowering business leaders to make sound decisions.

Tomorrow’s leaders will continue to address these priorities:

  • Build a “Fit for Purpose” operating model: Establish teams to target increased efficiency across people, process, and technology
  • Embrace a robust financial toolkit: Create high-quality centralized data repositories and reporting capabilities to manage the business, assess profitability, and improve decision-making.
  • Drive financial accountability: Incentivize employees to act as business owners and create a culture of financial responsibility and efficiency-driven mindset.

Sources: Morningstar, Evestment, Casey Quirk Performance Intelligence Database



The decade following the GFC permanently rearranged the asset management industry’s competitive landscape. A select group of firms demonstrated that acting boldly and decisively was a winning formula. But future success for these same firms is hardly a foregone conclusion—investors’ needs change and their search for the best products, solutions, and partners is constant. The firms that best execute on building visions with enduring competitive advantage, investing successfully in targeted growth areas, modernizing their operating models to deliver outstanding client experiences, and leveraging strong financial management disciplines will be the asset management industry’s winners in the next decade.