For some, 2016 was the year that changed everything. But for asset managers the start of 2017 looks pretty familiar nonetheless.
Twelve months ago, the industry started the year beset by uncertainty: Would managers struggle to find further opportunities? How would fund houses deal with a difficult environment for fund flows? And would margin pressure take its toll?
A year later, and those themes are still in place. If anything, they are more pressing than before.
The first two issues are, at least, cyclical in nature. One is, in part, a factor of the other: one reason why little new money has come into the industry over the past year is that fund buyers, and their clients, are very cautious.
Intermediaries and discretionary fund managers alike have seen a rising tide lifting most mainstream asset classes since the financial crisis, and are now wary of a reversal. The sole area that has attracted significant money in the past year – absolute return funds – is evidence enough of that.
Rather than asking when exactly wider enthusiasm for traditional markets will return, it is more important to realise that risk appetite will come back at some point. It’s a case of weathering the storm.
But while waiting for the skies to clear, the industry is aware that the ground beneath its feet is shifting, too. The watchdog is on its case, and Brexit increasingly looks like an event that will damage the ability to sell cross-border.
Even these situations pale in comparison with the big one: the shift away from the active funds of old. This isn’t as simple as active versus passive. The overarching trend, in a world where future returns are widely expected to be smaller, is a shift from higher-cost to lower-cost products.
The US is an instructive example of how the trend extends beyond these shores: there, even the top-performing active funds are now witnessing outflows. So I expect that even some of the best performers in the UK will see fees cut in the coming months.
For intermediaries, this is all good news. Irrespective of whether they favour active or passive strategies, or a mixture of the two, they stand a better chance of delivering a good return to clients if they can cut costs.
And if fund buyers weren’t already the main target for active managers, they soon will be: institutions are too far down the passive route, and the direct-to-consumer space will shortly be shaken up by the long-heralded arrival of Vanguard.
It’s going to be another interesting year.
Dan Jones is editor of Investment Adviser