The profits realized by money managers have not recovered in tandem with the rise in asset classes since the global financial crisis occurred, according to a report released by consulting firm McKinsey and Company. The firm attributed this drop in earnings to increases in compensation and technology costs, according to Bloomberg.
The media outlet reports that investment managers, which the consulting firm describes as operating "the most consistently profitable business in financial services," experienced a 45 percent drop in profits and a 14 percent decrease in asset values between 2007 and 2009 after the housing market entered recession and the financial crisis unfolded.
"Asset managers will need to tackle the business model issues at the center of rising costs, lower prices and high variability of margins, or risk structurally lower profitability in the years ahead," Salim Ramji, co-head of McKinsey’s asset-management group and various other authors wrote in the report, according to the media outlet.
Although layoffs in financial services are approaching 200,000 this year, rising compensation costs at money managers may make these firms attractive to newly-graduated job seekers.