Still, Richard Philbin, chief investment officer at Wellian Investment Solutions, believes that this is a real factor restricting growth in the industry.
“I think people have to wake up to the fact that margins are under pressure, but I do think there is still definitely scope to enhance returns as well,” he says.
“Fund groups have to cut their AMCs, but there is increased regulatory burdens that are also a cost, and an awful lot of compliance that has to be paid for – which isn’t a profit centre.
“One of the reasons we are seeing as many mergers in the asset management industry as we are is because firms want to maintain their profit margins.”
He adds: “Seeing Henderson and Janus merge, and seeing Standard Life Investments and Aberdeen merge, tells me that economies of scale will certainly work when you are getting an increased fixed cost burden.
“It is not just variable costs that are coming down, but fixed costs, such as regulation, are going up and therefore scale and size will help reduce that.”
