Fund managers keep profits in check
A series of short-term cost-cutting measures in the fund management industry have helped curb the impact of a number of negative factors - including 11 September - on this year's profits.
An interim update of a yearly survey by PricewaterhouseCoopers to assess the industry’s response to increased competition and the aftermath of 11 September revealed that margins have fallen less than previously expected.
In July PwC warned fund managers that unless management action was taken, margins would halve to around 15%.
Interim results for October show that despite falling fund values, revenue has so far been sustained and although costs have yet to fall, the rise has at least been checked.
According to the report, 80% of fund management companies have now taken steps to reduce or defer investment spend, 75% have significantly reduced marketing spend and two in three have curtailed recruitment.
Graham Wright, PwC consulting partner, said: ‘Only one in four have so far implemented redundancy programmes. The big question that remains is the extent to which margins will be managed up through reducing discretionary bonuses.’
Nevertheless the trend is still to hold costs at a level rather than achieve savings. One in three fund managers have, however, begun to outsource parts of their operations and a further 40% are considering the option.
Graham Wright, PwC consulting partner, said: ‘Most fund managers have now taken the relatively easy short-term steps to protect this year’s profits. The challenge now is to make the right structural changes, for example, through product rationalisation and operational restructuring to lock in longer-term, sustainable benefits without constraining growth.’
The update assessed 21 firms with over Pounds 1,000bn under management.