Traditional asset managers that are publicly traded have long offered investors the option of owning a piece of a steady — read boring — business. But Casey Quirk, the asset management strategy consultant owned by Deloitte, is forecasting that the much sexier business of managing private market assets will soon dominate, coming to represent about one-third of the industry’s revenue by 2024.
Recent tie-ups between managers, including Macquarie’s planned purchase of Waddell & Reed Financial, is speeding up the ascendance of private equity and other alternatives firms and transforming exchange-listed asset managers into a much hotter sector.
“I don’t think this is a cyclical trend. It’s secular,” said Benjamin Phillips, principal and chief strategist at Casey Quirk. “Why? Alternatives firms are valued at nearly twice the multiple of that of traditional managers. That reflects organic growth that is expected in the future and fees. Fee pressure hasn’t manifested in alternatives.” Fees for traditional asset management have been under pressure for years as investors have shifted much of their money to index funds.