A key theme in 2016 was fee pressure – this is not changing, fees will continue to come under pressure in 2017. If anything, the distributor holds a formidable card in the fee arena, and they are wielding their weight to their advantage – a portion of which is making its way to the investor.
The pressure on management and distribution fees always trickles downward through the hierarchy, so middle and back-office service providers will feel the same pressures as the manager.
Active investment management is not, and will never, go away. That being said, passive management will continue to erode the passive-in-disguise active fund base which is damaging to the real active funds. Any market correction that occurs as a result of the global uncertainty that is at play will expose the need for diversification and underpin the value of active.
Current market conditions do not help active management. If you are looking to create wealth, active management fees erode progress, but if you are defending an existing pot, active management provides better downside risk management.
The steepening yield curves are leading to pain in some quarters, but expect relief for money market funds as waivers are on the decrease.
The appetite for alternatives is continuing to grow despite shaky returns in some strategies. Non-correlated strategies and private equity funds are growing in an apparent search for alpha and diversification away from the broadly correlated traditional equity and fixed-income worlds.
In general, I see assets growing across the spectrum – with niche asset class specific exceptions.
My views on what to expect in 2016 are here if you want to compare!