Ben Phillips, Principal, Deloitte Consulting LLP

May 27, 2020

Remarks and Discussion:

Asset Management’s Pandemic Response

U.S. Securities and Exchange Commission

Asset Management Advisory Committee
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Source: Morningstar, eVestment, Casey Quirk analysis

Market Environment

So far, investor behavior directionally has mirrored that seen in the last economic downturn

Flight to safety

A shift away from 

active equity and credit

$416.8

$-767.8

Money 

Market

Total exMMF

Global Net New Flow, 

1Q 2020

$B, Registered Product 

and B/D SMAs

Global Net New Flow, 1Q 2020

$B, Registered Product and B/D SMAs

154

-51

-200 -133 -93

-459

Equity Fixed

-2

Alternative

14

Allocation

Passive Active

Retail investors 

led outflows

-0.6%

-0.3%

Retail Institutional

Global Net New Flow 

as a % of BoP AUM1

1Q2020

Key differences from 2008

• Health crisis

• Faster government intervention

• Better bank capitalization and 

financial systems operations to date

• Different structure and depth of 

capital markets

Risks

• Operational stress from rapid shift 

in working model

• Liquidity concerns with potential 

for systemic issues

• Health and safety concerns for 

personnel
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Market Environment

But asset declines are already taking their toll on investment manager financials...

... already impacting manager economics

-6.7%

Revenue Growth

Q1 Total Revenue (vs. Q4), 

Diversified Public Asset 

Managers

Assets under pressure ...

Asset Growth

Quarterly Growth in LT AUM (YE 2019 

to end-Q1), Global Industry Estimate

-14.4%

Source: Morningstar, eVestment, Public Filings, Casey Quirk Performance Intelligence Benchmarking Study

-3.7%

-1.9%

Cost Growth

Q1 Total Operating Expense 

(vs. Q4), Diversified Public 

Asset Managers

Margin Change

Q1 Margin Change Growth 

(vs. Q4), Diversified Public 

Asset Managers
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Source: Casey Quirk Performance Intelligence, S&P Capital IQ, eVestment, Morningstar

Market Environment

...and the starting point for asset managers today is substantially weaker than it was in 2007

55

46

2007 2019

34%

28%

2007 2019

2.2%

0.8%

2007-08 2016-19

32%

39%

2007-08 2016-19

Lower Growth

Organic Growth

2007-08 vs. 2016-2019

Average over period

Less Profitable

Median Operating Margin

2007 vs. 2019

Higher Fixed Costs

Non-C&B as % of Total Cost

2007-08 vs. 2016-2019

Average over period

Lower Fee

Median Realized Fee

2007 vs. 2019, bps
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Market Environment

Unlike the financial crisis, this health crisis also has social impacts that will influence asset managers

Health

Tracking

There will likely be a 

heightened need for 

surveillance and risk 

management 

as employees return to the 

workplace

Digital

& AI

Investment managers

ahead of the digital curve 

will outperform in the 

recovery

Corporate Purpose Boundaries

Businesses with strong 

corporate purpose are 

stepping up to support 

response efforts and 

communities thru ESG and 

activism

Innovation

Brand and customer trust 

will lead the recovery of 

risk appetite for investors

People are more focused 

on boundaries – operating 

across physical and 

geographic distances will 

become crucial for asset 

managers
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0

16

2

14

4

6

8

12

10

18

Market Environment

A low-rate world also may continue to rearrange sources and uses of capital

Number of Listed Companies

Developed Countries, Thousands, 2008-2018

Top 5 Global Central Bank Assets1

$T, 2008-2020

0.8

0.4

0.0

0.6

0.2

1.0

1.2

1.4

1.6

1.8

2.0

2.6

2.2

2.4

2.8

1Includes: U.S. Federal Reserve, Bank of England, European Central Bank, Swiss National Bank, Bank of Japan

Source: World Bank, Thomson Reuters, World Development Indicators, Preqin, Central Bank News

Fewer firms are 

listing on exchanges

Dry powder is at 

an all-time high

Central bank assets 

are at historic levels

2008 2018 2000 2020 2008 2020

78

64

52

50

54

56

58

60

62

66

68

70

72

74

76

Total Available Dry Powder

$T, 2000-2020

Investors worldwide may need to 

examine a broader mix of assets

Private markets investors have a greater 

role in supplying and managing capital

Governments will rank among the 

world’s largest asset managers
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Near-Term Implications for Asset Managers

During this uncertain time, asset management firms can be sure of at least four primary principles

Health and safety are the 

priority as we attempt 

to ‘return to normal’

Building a flexible business becomes a higher priority – cost optimization, 

focus, and investment in technology become your best friends

The economic cushion is 

much lower than 

the GFC, requiring action

Virtual interactions will 

become far more the norm

Communicating a ‘return to business’ plan is job #1 – HR And Operations 

leadership will be essential over the next year

Constructing a durable virtual operation is necessary now – sustainable 

WFH operations and long-term work culture protocols must be developed 

Credit and liquidity 

risk may amplify

Investors and intermediaries will seek asset managers with strong, 

transparent risk management protocols to navigate potential defaults
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Medium-Term Implications for Asset Managers

The crisis will lead many asset managers to explore transformational change

Rising national boundaries, travel 

interruptions, and different recovery 

rates necessitate evaluation on role 

and impact of global operations

Reevaluate

Globalization

Active management must adapt to 

different capital markets, a new focus 

on social outcomes, and delivering 

long-term value in multiple ways

Reactivate Active 

Management

Traditional distribution models, 

heavily reliant on in-person 

engagement, will adapt in a 

potentially protracted environment

Modernize Client 

Engagement 

Redesign 

Organizational Culture

As the working model is upended, 

reinforce and remake the culture for 

the next-generation

Firms will look to drive efficiency and 

cost reduction in repeatable or nonessential processes and locations

Relocate, Outsource 

and Automate

In market stress, well capitalized firms 

will use M&A to access new markets, 

acquire new capabilities, and drive 

scale benefits

Leverage M&A to

Drive Value
Return Generation in a Low-Interest Rate World

Expansionary monetary policy continues to elevate the 

portfolio role of risk assets

Portfolio Guidance to Savers

As practitioners, investment managers will deliver 

market-leading allocation advice providing savers with 

the confidence and clarity to achieve their objectives

Risk Allocation & Capital Deployment

Asset managers remain at the intersection of 

risk allocation and capital deployment, both 

critical recovery dynamics

Long-Term Perspective

Asset managers remain one of the longerperspective participants in the financial system

Long-Term Implications for Asset Managers

Asset management will play a critical role in the recovery
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