Profits Could Soon Halve For UK And Irish Fund Managers

by Carla Johnson, Investors Offshore.com

03 October 2001

A survey conducted throughout the UK and Ireland by PricewaterhouseCoopers is predicting that fund managers' profit margins could be cut by half if current market trends continue and calls for collaborative action across the fund industry to address the issue.

According to the 2001 Investment Management Survey, the fund industry is entering a new era. For the past decade it has enjoyed globally rising equity markets and stable costs leading to higher profit margins but over the past year those profit margins have declined slightly leaving the industry to depend on continued growth to maintain margins in a climate of decreasing pricing.

'We are now entering a new era when many fund managers may report losses due to the double impact of pricing pressures and simultaneous market volatility, the latter having been exacerbated by recent events in the US,' explained Damian Neylin, partner at PricewaterhouseCoopers.

It was also noted that IT investment by the fund industry is vital to profit-making. The industry has concentrated mostly on B2C (business to consumer) applications but the survey suggests that there are more benefits to be gained from B2B (business to business) applications such as 'Straight Through Processing.'

The survey found that the industry is 'heavily fragmented' despite recent alliances and mergers, and on their own, businesses will be forced to struggle to survive. PwC recommends that cooperation among businesses and a form of 'influential representation' would provide the industry with a 'common aim ... and either sharing existing resources or negotiating together with a service provider could provide genuinely efficient scale of operation.'

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