Il golden decade of asset management it is probably winding down and we are on the verge of what some have called “the biggest tightening in history”which will not be without consequences for asset managers.
Mediobanca Securities in a report entitled ‘The Great Reset’ notes how the increase in inflation is having an impact on consumption and prolonged negative effects on savings. Italian families are in good health, the report says, with the financial wealth that has grown by 70% over the past twenty years and currently stands at 5,000 billion euros. In these years the high historical possession of bonds, due to which the Italians were defined “BOT people“, Ie those savers who, out of prudence, tend to invest in safe government bonds such as BOTs, keeping away from riskier securities, the limited exposure to managed savings has reversed significantly.
Direct exposure to bonds is now negligible, at 4.3% of total financial assets, from over 18% pre-QE. “Although the level of household debt does not in itself represent a cause for concern, we believe that it should if related to the weak trend in disposable income”, asserts the merchant bank of piazzetta Cuccia. Wages have progressed much more modestly than the stock of debt, and this could become a threat in the event of a severe recession.
A decline in GDP typically reduces disposable income and, even more, consumption. ConsequentiallySavings generally increase in macro downward trends but what is different this time is the impact of inflation. Assuming a 10% increase in consumption in 2023, the flows dedicated to savings could collapse by 60-70%, or about 110 billion euros per year.
Will the Bot People be back?
For asset management players this would mean a lower flow of around 20 billion a year, roughly 60% of what the networks had brought home in 2021; above all, compared to the golden years, the change could be structural. The Mediobanca Securities report also highlights the possible return of the Bot people to the scene. “The unexpected aspect for most savers is the negative performance, often double-digit, recorded by bond funds this year – explains Gian Luca Ferrari, author of the Mediobanca report – products that, not sporadically, still have commissions. management greater than 2%. This could generate a substantial disaffection towards these products and make interest in individual bonds, governmental or corporate, return ».
Negative effects on managed savings
Assuming that the holding of bonds returns to 10% in 2/3 years, financed mainly through a transition from asset management, 290 billion euros could flow into bonds and 190 billion euros could exit from asset management. For promoters, this could mean an outflow of € 30 billion from managed assets, or € 10-15 billion / year, assuming that this target is achieved in 2023 or 2024. A further repositioning from 10% to 15% on average -long term it would generate further outflows of 8-12 billion euros in the following 2/3 years. Overall, the asset management sector could lose over € 500 billion of AuM over time, of which € 80 billion currently in the hands of Italian collectors (out of a total of € 500 billion of AuM).