The new report, "Winning Strategies in Uncertain Times: Global AssetManagement 2008," features a thorough analysis of the trends that areshaping the asset-management industry for all types of players in differentregions, as well as a comprehensive market-sizing effort encompassing morethan 30 markets. The report, based on BCG's sixth annual study of theglobal asset-management industry, pays special attention to the actionsthat players need to take in order to gain leading market positions inthese uncertain times.

According to BCG, key factors for success in rebounding from the subprimecrisis will be better addressing client needs through improved distributionpractices and enhanced risk management, as well as containing costs. Itwill also be critical for asset managers to explore new growthopportunities, particularly in Asia-Pacific and Brazil. Details on theseinitiatives are outlined in the report.

"Financial upheavals such as the subprime crisis present opportunities, notjust threats, to players that develop the most robust business models andthe most creative strategies," said Kai Kramer, a Frankfurt-based partnerand a coauthor of the report. "Leading players, in fact, use highlyuncertain times to their advantage, gaining market share and competitiveedge over slower-moving rivals that simply try to wait out crises and hopefor the best."

Despite the subprime contagion, which spread during the second half of2007, significantly cooling down what had been a solid first half for assetmanagers, the year overall was nonetheless relatively strong. But 2008 hasbeen tremendously difficult amid hypersensitive markets and extraordinaryevents on Wall Street and in other financial centers in the early autumn --and 2009 promises to be at least as challenging. That said, thefundamentals of the asset-management business remain positive, and playersneed to focus not only on weathering the crisis but also on positioningthemselves for the next growth phase, BCG says.

"It is safe to say that opportunities for asset managers still abound,"said Philippe Morel, a Paris-based senior partner and a coauthor of thereport. "For example, many investors, having moved into cash vehicles as asafe haven, will be looking to put those funds back into actively managedinvestment products when confidence in the market fully returns, howeverlong that may take. Aging populations will still need their retirementfunds looked after. Potential profit pools in many regions, especiallyAsia-Pacific, are growing."

According to the report, the value of professionally managed assets roseglobally in 2007 by 13.9 percent to $58.9 trillion. Net of currencyeffects, growth in assets under management (AuM) would have been 10.3percent. On a regional basis, AuM growth in the Asia-Pacific region (net ofcurrency effects) surpassed that in Europe. China, for the first time,broke into the ranks of the top ten global markets with roughly $900billion in AuM at the end of 2007. China may not maintain that status in2008, given the precipitous fall of its equity market.

BCG research shows that the global share of core asset-management products-- actively managed equity and fixed income, plus money market vehicles --was 74 percent in 2007. About 8 percent of global AuM was allocated topassive fixed-income and equity funds, still six times as much as theamount allocated to exchange-traded funds (ETFs). But ETFs are growingabout three times as fast as other passive products. Innovative oralternative products (including real estate, private equity, hedge funds,and other categories) accounted for about 16 percent of professionallymanaged assets.

The report says that although the current focus of nearly all assetmanagers is rightly centered on reinforcing risk management and managingcosts, asset managers must also look ahead to how the competitive landscapewill evolve. In particular, there may be more opportunities for mergers andacquisitions in developed markets following the subprime crisis -- amid lowvaluations for listed players and the desire of some large banks to divesttheir asset-management divisions in order to refocus on their coreactivities. Also, it remains true that strong, long-term growth can readilybe attained through exploring new or emerging markets such as those inAsia-Pacific and Brazil -- although these regions also suffered from thecrisis this year. But asset managers must keep in mind that Asia-Pacificmarkets are highly diverse, requiring distinct approaches and strategies.

To receive a copy of the report or arrange an interview with one of theauthors, please contact Eric Gregoire at +1 617 850 3783 orgregoire.eric@bcg.com.

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