Bracing for Impact: Investment Managers Face Stormy Seas Ahead

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Volatile markets, rising rates, and slowing growth pose challenges for the investment management industry in 2023 and 2024, according to a recent report from Fitch Ratings. While some managers may stay afloat, others could founder amid the tempest.

Choppy Waters Favor Some Vessels Over Others

The voyage ahead looks rockiest for traditional asset managers reliant on fees tied to asset values and fund flows. As markets tumble and investors grow cautious, these revenue streams face peril.?

Alternative investment firms may better navigate the swell. With fees less linked to asset prices, their revenues appear more protected. However, volatile valuations and slowing exits could still dampen returns. And raising new capital could grow difficult if investors pivot back to traditional products offering higher liquidity and yield.

Canadian pension funds seem best equipped to ride out rough seas. Their captive inflows, long-term orientation, and ample collateral provide ballast in the storm.

Seeking Safe Harbor in Diversification

With performance headwinds rising, competition for investor assets will likely intensify. Broadly diversified managers benefiting from varied, uncorrelated strategies can better weather the challenges ahead.?

Consolidation may ensue as cashed-up players acquire niche competitors to expand their offerings. Scale and diversification will be at a premium amid market unrest.

Plotting a Course Through Complex Currents

Fitch expects traditional managers to emphasize ESG offerings, though "greenwashing" risks regulatory backlash. Alternative managers may expand in private credit as banks tighten lending. But rapid growth here also invites scrutiny.

Despite the gloomy forecast, most global investment firms still have stable credit outlooks. Those facing downgrades typically show high leverage or concentration in vulnerable strategies. Upgrades mostly await firms improving leverage and diversity.

Through prudent navigation, the industry can reach calmer waters again. But the voyage ahead will test even the most seasoned captains. Careful piloting, robust vessels, and expert crews will be essential in the days to come.

For personalized advice on protecting your wealth in these uncertain times, consider consulting a??Private Portfolio Manager?who will allocate up to 35%?of your investments into alternative assets like private equity, private real estate, private debt, private mortgages, infrastructure, and commodities. To learn more, contact me at 604.613.1693. Alternatively, you can email me at?[email protected]??

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Credits: Global Asset Managers' Outlook Dims: Fitch.

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