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Moody's Ratings has maintained a stable outlook for the global asset management industry in 2026, citing expectations of steady assets under management (AUM) growth supported by lower interest rates and subdued but stable global economic expansion, even as competition continues to squeeze profit margins.
According to the ratings agency, global economic growth is expected to remain broadly flat over the next two years, with inflation easing across most major economies. In the United States, inflation is forecast to decline to around 2.8 per cent in 2026, prompting further rate cuts by the Federal Reserve, while other regions are nearing the end of their easing cycles. These slightly easier monetary conditions are expected to support financial markets and benefit asset managers through higher market valuations. "Although this is above the 2.0 per cent Federal Reserve target rate, the Fed will likely continue to cut rates at upcoming meetings, including December 2025, to boost the labour market. Outside the US, inflation has been largely tamed. But the picture has become more mixed because some regions are nearing inflation targets and are likely close to ending easing cycles, or are currently on hold. Overall, slightly easier monetary conditions in certain regions should help improve economic growth in 2026, which benefits financial assets," the report read. Moody's noted that equity markets across the US, Europe and Asia performed strongly in 2025 despite intermittent volatility, positioning asset managers for improved revenue growth entering 2026. "Equity markets, after experiencing some volatility during the first half of 2025, have performed well year-to-date in the US, European and Asian markets. However, volatility will likely pick up in 2026 because industries such as AI are vulnerable to a slowdown after several years of outperformance," the rating agency noted. Global industry AUM is projected to finish 2025 at or near record levels, creating a favourable backdrop for fee income. However, the rating agency warned that profitability pressures will persist. The long-term shift away from actively managed mutual funds toward lower-fee exchange-traded funds (ETFs), combined with rising costs related to technology, personnel and distribution, will continue to weigh on margins. These dynamics favour large, diversified asset managers with scale advantages, while smaller and mid-sized firms are likely to lose market share, accelerating industry consolidation and partnerships. "Asset managers globally face weakness in profitability from lower management fees and rising costs for personnel, technology and distribution. These higher costs and increased competition will continue to drive industry consolidation and partnerships," Moody's said. Alternative asset managers are expected to outperform traditional peers, benefiting from lower interest rates, a rebound in private equity fundraising, growth in private credit, and increased merger and acquisition activity. Moody's expects private markets to generate more than half of the asset management industry's total revenue by 2030, given their significantly higher profitability compared with traditional strategies. (ANI)
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