Global funds managers are experiencing what the insurance industry has been dealing with for more than 10 years – cut-throat competition and consolidation.

The Boston Consulting Group (BCG) says the shrinking global funds management market of the past two years may be recovering, but “only the very fittest will enjoy the profits seen in the boom of the late 1990s”.

In a major report involving more than 40 of the world’s largest funds management institutions, BCG says tumbling asset values, falling revenues and rising costs are making the market “hyper-competitive”.

BCG predicts that the shrinking funds management market of the past two years is set to recover in 2003. But industry profitability is “likely to decline or, under our best-case scenario, remain flat”.

And like insurance brokers, the influence of retail funds managers is growing at the expense of the manufacturers. “Distributors control customer relationships and dictate how much space on their ‘shelves’ is given to individual asset management groups, sometimes even asking them to tender.”

BCG analyst Andy Maguire said that with about 40% of all global asset managers “either unprofitable or teetering on the brink, a major shakeout could occur in which the strong get even stronger and many of the weak leave the business”.