BCG Global Asset Management Report 2024: AI and the Next Wave of Transformation

Global Asset Management Industry Overview: The 2023 Rebound

The global asset management industry’s AuM reached nearly $120 trillion in 2023, recovering from a 9% decline in 2022 that was driven by rising interest rates and market volatility. The rebound was broad-based, with North America leading at 16% growth, followed by Europe and Asia-Pacific markets. However, this headline recovery masks fundamental structural weaknesses that continue to erode the industry’s profitability.

Net flows as a share of beginning-of-year AuM have been declining steadily, falling from 4.4% in the 2005-2009 period to just 0.9% in 2023. This trend underscores a critical reality: organic growth from new client assets is becoming increasingly difficult to achieve. The majority of AuM growth has been driven by market performance rather than genuine business development, a dependency that becomes precarious as central banks maintain higher interest rates.

Regional dynamics revealed important nuances. While all major markets participated in the recovery, the pace and composition of growth varied significantly. North American asset managers benefited disproportionately from the technology-led equity rally, while European managers faced headwinds from persistent inflation and geopolitical uncertainty. Asia-Pacific markets, excluding Japan and Australia, saw more modest growth of 5%, reflecting mixed economic conditions across emerging economies.

Five Fundamental Pressures on Asset Management Growth

BCG identifies five structural pressures that continue to weigh on the asset management industry, none of which showed signs of abating in 2023:

Revenue Pressure from Market Dependence

Since 2006, approximately 89% of the industry’s revenue growth has come from market appreciation rather than net new flows or pricing power. With interest rates expected to remain elevated compared to the post-2008 era, this primary growth engine is likely to slow considerably. Asset managers that have relied on rising markets to compensate for fee compression and client attrition face a particularly challenging outlook.

The Unstoppable Rise of Passive Investing

Passive products captured 70% of total global mutual fund and ETF net flows in 2023, a sharp acceleration from the 57% average during 2019-2022. The top ten fund managers captured an increasingly dominant share of positive net flows into passive vehicles, creating a winner-take-most dynamic that leaves smaller active managers struggling for relevance. This structural shift shows no signs of reversing.

Accelerating Fee Compression

Average fees continued their downward trajectory, falling to 22 basis points in 2023 from 25 bps in 2015 and 26 bps in 2010. Tight monetary policies and market uncertainty prompted investors to move into lower-fee products, with money market funds attracting $1.3 trillion and bond products garnering $700 billion in net inflows, while public equity experienced $200 billion in net outflows.

Rising Cost Structures

Industry costs have risen approximately 80% since 2010, with a compound annual growth rate of 5%. Compliance requirements, technology investments, and talent acquisition costs have all contributed to this expansion. Costs as a share of revenue reached concerning levels, further squeezing profit margins across the industry.

Product Innovation Challenges

Despite continuous efforts to develop new offerings, product survival rates have deteriorated significantly. Only 37% of mutual funds launched in 2013 still existed by 2023, compared with 60% survival for funds launched a decade before 2010. Investors increasingly favor established products with reliable track records over untested innovations.

The Three Ps Strategy: Productivity, Personalization, and Private Markets

To overcome these structural headwinds, BCG recommends a strategic framework centered on three interconnected pillars—what they call the “Three Ps”:

Productivity improvements across the entire value chain represent the most immediate opportunity. BCG estimates that AI-enabled efficiency gains could reduce asset managers’ cost base by 5-15%, with the most significant savings in operations (15-25%), investment management (15-25%), and IT functions (15-30%). These are not marginal improvements but transformational changes that can fundamentally alter the economics of running an asset management business.

Personalization at scale has long been an aspiration but is now becoming achievable through AI. The ability to create and manage customized portfolios, tailor client communications, and deliver individualized experiences can help asset managers differentiate themselves in an increasingly commoditized market. Early adopters report meaningful improvements in client retention and acquisition.

Private Markets expansion offers access to higher-margin products that can diversify revenue streams away from fee-compressed traditional products. AI enhances the efficiency of deal teams and their ability to conduct due diligence, monitor portfolio companies, and drive value creation across private equity, private credit, and real assets portfolios.

AI Adoption in Asset Management: Survey Findings

BCG’s survey of asset managers representing over $15 trillion in AuM reveals that the industry is approaching AI with a combination of urgency and strategic intent. The vast majority of respondents expect AI to bring significant or transformative changes to their businesses in the near term, signaling a fundamental shift in industry mindset.

Two-thirds of surveyed firms either have plans to roll out at least one generative AI use case in 2024 or are already scaling one or more applications. This level of commitment represents a dramatic acceleration from just two years ago, when most asset managers were still in exploratory phases. The technology adoption curve mirrors patterns seen in other financial services sectors.

Key findings from the survey include:

• Investment Research Acceleration: AI tools enable analysts to conduct preliminary data collection and analysis in natural language, with one workflow showing the ability to summarize company market positions, analyze financial filings, and draft investment reports with significantly reduced human effort.
• Sales and Marketing Enhancement: AI-powered tools can draft white papers, create social media content, analyze prospective client data, and support real-time client interactions—fundamentally changing the efficiency of client-facing teams.
• Operational Transformation: Document preparation, portfolio performance analysis, and compliance reporting are being accelerated through AI, with some firms reporting 15-25% efficiency gains in these areas.
• Risk Management Revolution: AI can analyze system logs and real-time data, identify irregular activities, and proactively flag anomalies before portfolio values cross critical thresholds.

AI-Powered Productivity Gains Across the Value Chain

BCG’s analysis maps AI’s potential impact across every function in an asset manager’s value chain, with estimated efficiency gains ranging from 5% to 30% depending on the function. The most promising areas include:

These efficiency gains translate into a potential overall cost base reduction of 5-15%, representing billions of dollars in savings across the industry. However, BCG emphasizes that realizing these gains requires more than simply deploying technology—it demands organizational transformation in how teams work, how data flows, and how decisions are made.

Generative AI Use Cases Reshaping the Industry

The report highlights several generative AI applications that are already transforming asset management operations. Investment research stands out as a particularly high-impact use case, where AI tools can conduct searches, analyze financial filings, detect supply chain disruptions, and draft tailored reports—all through natural language interactions.

In one illustrative workflow, a research analyst requests information about a company and its market position. The AI tool responds with a comprehensive summary drawing from public filings, earnings transcripts, and news coverage. The analyst then directs the tool to perform deeper analysis on specific topics, such as supply chain risk or competitive positioning. Finally, the tool drafts a formatted investment report focused on the key issues identified—a process that previously required days of manual work.

Insurance portfolio management represents another frontier for AI transformation. The report details how AI models can compare portfolio holdings and their risk levels, optimize runoff profiles, and establish new risk thresholds simultaneously—capabilities that traditional mathematical models handle one variable at a time. Some firms using AI-powered risk and allocation analytics have achieved risk-adjusted returns 10 to 20 basis points higher than previous performance, while reducing associated costs by 5-15%.

Personalization at Scale: The New Competitive Frontier

The BCG Global Asset Management Report 2024 identifies personalization as perhaps the most significant long-term competitive differentiator. In a world where core investment products are increasingly commoditized through passive vehicles, the ability to deliver tailored solutions and experiences becomes the primary source of client value.

AI enables personalization across multiple dimensions. Portfolio construction can be customized to individual risk tolerances, tax situations, ESG preferences, and life goals without the prohibitive costs traditionally associated with bespoke management. Client communications can be tailored based on behavioral analysis, ensuring that each interaction delivers relevant information at the right time and through the preferred channel.

The report cites examples of asset managers using AI to create “segments of one”—treating each client as a unique market with individualized offerings. This approach has shown promise in both wealth management and institutional channels, where client expectations for customization are rising rapidly. The firms that master AI-powered personalization will likely capture a disproportionate share of organic growth in the years ahead.

Private Markets: AI Enhancing Deal Teams and Value Creation

Private markets represent the third strategic pillar, offering asset managers access to higher-margin products that can offset fee compression in traditional asset classes. BCG notes that private equity, private credit, infrastructure, and real assets have all seen growing investor interest, driven by the search for returns in a higher-rate environment.

AI enhances private market capabilities in several critical areas. Due diligence processes can be accelerated through automated analysis of financial statements, legal documents, and market data. Portfolio monitoring benefits from AI’s ability to track operational metrics across hundreds of portfolio companies simultaneously, flagging issues before they become problems. Value creation planning can be informed by pattern recognition across historical deals, identifying the strategies most likely to drive outperformance.

The convergence of private market expansion and AI capability creates a particularly compelling opportunity for asset managers willing to invest in both simultaneously. Those that can demonstrate superior sourcing, execution, and value creation powered by AI will attract significant capital inflows from institutional investors seeking differentiated alpha generation, as documented in the latest institutional investment trends.

Implementation Challenges and Strategic Recommendations

While the opportunity is clear, BCG acknowledges that implementing AI in asset management faces significant challenges. Data quality and governance remain primary obstacles, as many firms struggle with fragmented data architectures that prevent AI tools from accessing the comprehensive datasets needed for effective analysis. Talent acquisition is another constraint, with competition for AI specialists intensifying across all financial services sectors.

Regulatory considerations add complexity, particularly around the use of AI in investment decision-making and client interactions. Asset managers must navigate evolving regulatory frameworks, including the SEC’s increasing scrutiny of AI-related claims and the EU’s comprehensive approach to AI governance.

BCG recommends a phased implementation approach:

1. Foundation Building: Establish robust data infrastructure and governance frameworks that enable AI deployment at scale.
2. Use Case Prioritization: Focus initial AI investments on high-impact, lower-risk applications such as research acceleration and operational automation.
3. Organization Design: Restructure teams and workflows to maximize the value of human-AI collaboration rather than simply automating existing processes.
4. Culture Transformation: Build an organizational culture that embraces AI as a core capability rather than a peripheral technology experiment.
5. Continuous Evolution: Develop the ability to rapidly adopt new AI capabilities as the technology evolves, maintaining competitive advantage.

The Urgency of Action: Why Waiting Is Not an Option

Perhaps the most compelling message from the BCG Global Asset Management Report 2024 is the urgency of action. The report concludes unequivocally: “Waiting is not an option when it comes to investing in AI. The technology is rapidly developing, and asset managers that do not start their journey now risk being left behind.”

This urgency is driven by the compounding nature of AI advantages. Early adopters benefit not only from immediate efficiency gains but from the learning effects that accumulate over time. The data generated through AI implementation feeds back into model improvement, creating a virtuous cycle where the gap between leaders and laggards widens continuously.

For the asset management industry, the stakes are existential. Firms that successfully integrate AI into their three Ps strategy—productivity, personalization, and private markets—will be well-positioned to thrive despite the five fundamental pressures weighing on the industry. Those that delay risk finding themselves unable to compete on cost, capability, or client experience in a rapidly transforming landscape.

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Key Data Points and Industry Benchmarks

The report provides a wealth of quantitative benchmarks that investment professionals can use to assess their organizations’ positioning:

• $120 trillion: Global AuM in 2023, up 12% from 2022
• 0.2% vs 4.3%: Revenue growth versus cost growth in 2023, resulting in 8.1% profit decline
• 89%: Share of revenue growth attributable to market appreciation since 2006
• 70%: Share of 2023 net flows captured by passive products
• 22 bps: Average industry fee in 2023, down from 26 bps in 2010
• 37%: Survival rate of mutual funds launched in 2013 that still existed by 2023
• 5-15%: Estimated overall cost reduction achievable through AI implementation
• 10-20 bps: Additional risk-adjusted returns achieved by leading AI adopters in insurance asset management
• Two-thirds: Share of surveyed firms planning to deploy or already scaling GenAI use cases