What is in store for asset management in 2025?

During 2024 we saw the growth in the UK of the active ETF, the launch of the long-term asset fund and the continuation of existing trends such as consolidation.

If crystal balls were for anything but show, investors would all be billionaires by now, but it is always useful to take a forward look at what is likely to happen and adjust portfolios accordingly.

Allocators and fund managers alike explain how certain themes might shape investment strategies in 2025, and discuss what impact events might have on the fund management sector itself.

One thing that marked 2024 is consolidation, which appears likely to continue into the next 12 months.

According to Fred Hannson, managing director of corporate insights specialist Marshberry, there have been 65 transactions worth £5mn and above in the UK wealth management sector to the end of November 2024.

Half of the deals were acquisitions of asset management and trading platform firms. The other half was accounted for by smaller wealth management businesses being acquired by larger peers. 

Ryan Hughes, AJ Bell Investments’ managing director, said: “The consolidation among asset managers has been a trend for some time and it does not look like it will stop any time soon.

“With passive investment continuing to eat active managers’ lunch, the relentless pressure on their revenue continues, particularly given so many are seeing net outflows.

“Their response to this is seen to be cost-cutting through consolidation, with the small and medium players seemingly in the crosshairs.”

He said many asset managers lack a clearly defined competitive advantage and are running inefficient fund ranges.

This, he said, would make further consolidation “inevitable”.

As reported in Asset Allocator and sister title FT Adviser, many fund management groups are struggling, such as M&G Wealth, which said it was pulling out of the advised platform market after it experienced net outflows of £0.9bn for the first six months of 2024.

Asset allocator SG Kleinwort Hambros’s Gene Salerno said: “The fund management sector remains in a secular downtrend, and there is no obvious catalyst for reversing that in 2025.”

Moreover, product ideas for retail investors seem to be thin on the ground, despite the rising interest in things such as Ltafs.

Meanwhile funds such as active ETFs are struggling for purchase in the UK because they lack the clear tax advantages that they have in the US.

Future of ESG

ESG funds are expected to continue having a rough time in 2025, notwithstanding UK and European regulatory moves to prevent greenwashing and improve consumer trust in the sector.

There may be even greater headwinds, especially under President Trump, who hit the campaign trail in 2024 with the slogan: “drill, baby, drill”.

With passive investment continuing to eat active managers’ lunch, the relentless pressure on managers’ revenue continues

Ryan Hughes, AJ Bell