PwC: Asset manager margins fall as infrastructure costs climb
Profit per asset under management at asset managers has fallen 19% since 2018 and is projected to drop another 9.1% by 2030, according to a new PwC report. The firm argues that infrastructure decisions are now central to how asset managers compete.
- PwC says profit per AuM is down 19% since 2018 and projected to fall another 9.1% by 2030.
- 24% of firms globally cite data fragmentation and 17% legacy systems as major barriers to scaling AI.
- About 70% of infrastructure providers expect a larger share of the asset management revenue pool, and 68% name hyperscale cloud providers as the main emerging threat.
- 44% of asset managers favour hybrid sourcing, rising to 46% in North America.
- The report identifies four infrastructure archetypes and concludes that no single model fits every firm.
Margin pressure puts infrastructure on the strategy agenda
PwC's report, titled Global Asset Management Infrastructure: Rethinking the industry's piping, says infrastructure is moving from the back office to the centre of asset managers' strategy. The reason is margin pressure: profit per AuM is down 19% since 2018, and PwC projects a further decline of 9.1% by 2030.
As a result, choices about which capabilities to build, buy or access through partners now shape competitive position, according to the report. It draws on insights from 150 asset managers and 50 infrastructure providers.
Roland Kastoun, Global Asset and Wealth Management Advisory Leader at PwC, put it this way: "The industry's profits per dollar managed have fallen by almost a fifth, and the bill for the pipes keeps rising." He added that the managers who survive the next five years "won't be the ones with the flashiest AI, but rather the ones who fixed the so-called boring stuff first."
Data problems hold back AI
The report links infrastructure to firms' ambitions for artificial intelligence. Globally, 24% of respondents cite data fragmentation and 17% cite legacy systems as major barriers to scaling AI.
In North America, data fragmentation is the leading barrier for 26% of respondents. A further 21% point to the lack of unified or real-time data pipelines.
Providers eye a bigger share, with cloud giants seen as a threat
The infrastructure layer is also turning into a competitive arena. About 70% of providers expect a larger share of the asset management revenue pool, including 55% of North American providers who anticipate moderate growth. Meanwhile, 68% name hyperscale cloud providers as the main emerging threat.
Peter Pollini, Financial Services Industry Leader at PwC US, said: "Infrastructure has quietly become one of the most consequential strategic decisions an asset manager makes." He said the firms that pull ahead "won't be those that own the most technology, but those that decide deliberately what to build, what to buy and where a partner can do it better."
Hybrid sourcing is the favoured model
PwC finds that 44% of asset managers favour hybrid sourcing models that combine in-house, bought and partnered capabilities. In North America the share rises to 46%, while 18% prefer to partner and 16% prefer to build in-house.
The report identifies four emerging infrastructure archetypes:
- infrastructure orchestrators
- digital and tokenisation platforms
- specialist modular providers
- integrated asset managers
PwC concludes that no single model fits every firm. Managers need to decide which capabilities to own, which can be standardised and where a specialist provider can do the job better.
What it means for the industry
According to PwC, firms that make these decisions early will be better placed to manage costs and protect margins through 2030. For asset managers, the findings suggest that fixing data pipelines and legacy systems may come before large AI investments. For infrastructure providers, the report points to a growing share of industry revenue, alongside rising competition from hyperscale cloud companies.
PR Newswire: Asset manager margins squeezed as infrastructure bill climbs, PwC finds
