New Delhi, December 12
Moody's has revised its outlook for the global asset management industry in 2025 from negative to stable, citing expectations of lower interest rates and looser monetary policies driving economic growth globally in the next 12-18 months.
According to Moody's, improved economic conditions are anticipated to bolster investor confidence and increase assets under management (AUM) for companies in the sector.
Global economic growth continues to provide a stable foundation for financial markets. Equity markets have experienced a strong rally over the past two years, driven by sustained economic growth, particularly in the United States.
Falling interest rates, supported by low and stable inflation, are expected to further secure this expansion. The resolution of election uncertainties in multiple regions has also contributed to market stability, encouraging investors to shift towards higher-risk asset classes.
However, Moody's warns that geopolitical tensions, trade disputes, or a reversal in inflation trends could disrupt these favourable conditions and lead to increased market volatility.
The growth in AUM is projected to significantly lift industry revenue and margins. Although traditional active asset managers face challenges from rising operating costs and a shift towards low-fee products such as exchange-traded funds (ETFs), the substantial increase in AUM over the past year is expected to offset these pressures.
As investors move funds from low-fee money market accounts to higher-risk and higher-fee asset classes, industry revenues are likely to benefit.
Organic growth within the industry is also set to improve. While traditional active mutual funds may continue to see outflows, rising markets and stronger investor confidence are likely to drive growth in other segments, including fixed income, ETFs, and separately managed accounts (SMAs).
Lower interest rates and positive economic momentum are expected to spur private market asset deployments, leading to higher fundraising activity and investment flows.
Alternative asset managers are positioned to gain from an improving deal environment. Moody's predicts increased realizations, driven by reduced regulations and favourable market conditions, will enhance fundraising opportunities.
Private credit remains a rapidly growing segment, attracting substantial investor interest due to its higher yields and fees. The industry's long-term outlook is further strengthened by advances in generative AI technologies.
These innovations offer the potential to improve operational efficiencies and scalability, particularly for larger firms that integrate AI into their processes.