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Firms are now focused on rebuilding in the face of falling profit margins, with distribution shifts key to survival in a much-changed environment.

So far this year, most European countries have at least seen positive inflows for the first time since mid-2007.

But the consultant warned industry profits were likely to shrink by 25 per cent from their 2008 level, given significantly lower average assets and revenues.

Pierre-Ignace Bernard, leader of McKinsey's European asset management practice, said: "Although all asset managers understand the gravity of the situation, too few have reacted with sufficient vigour and fundamentally restructured their business models.

"The winners will be those firms that develop a more resilient operation while seizing the opportunities created by the upheaval."

Overall, the meltdown in global assets in 2008 saw the industry shrink by 19 per cent, breaking down into a 20 per cent asset value drop and just 1 per cent inflows.

Performance also fell by double-digit percentage points nearly everywhere.

Some areas thrived despite this background, however, with AAA-rated money market and fixed income funds both proving popular, alongside passive vehicles such as trackers and exchange traded funds.

In general, institutional business outperformed retail as the more conservative asset mix led to better returns in 2008.

Looking to the future, McKinsey said distribution would be a key battleground, with recent events slowing the spread of third-party channels as banks have had to focus elsewhere.

This has meant a shift from open platforms toward online guided-architecture models.

In the UK, imminent regulatory changes outlawing adviser commission would alter this distribution landscape even further, the company predicted.

Martin Huber, director of McKinsey, said asset managers could be forced to cede a greater share of revenues to distributors to offset this loss of entry fees.

He said: "Most importantly, asset managers need to move from competing for shelf space, pushing products and negotiating rebates with distributors to appealing directly to end customers using strong products and brands.

"Aspirational CEOs should think about enlarging their footprint in financial services provision - from providing fund management to offering customer-centric solutions.

"This would require them to integrate structuring and insurance components, as well as extended distribution, into their business models."

McKinsey said the current environment was a unique opportunity for firms to overhaul their cost base and reshape business models.

It said the recent boom and bust had showed there remained staggering differences in growth and profitability across different markets, products and client segments.

In 2008, for example, various institutional areas held up well, and ETFs-plus-asset-allocation products showed healthy growth, suggesting groups must have a diversified range to thrive through cycles.