Strategy as well as size will shape asset manager M&A

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Investment bosses talk about integrating private and public market capabilities, but this requires redrawing distribution models, client engagement strategies and operational infrastructure.

The asset management industry is in the midst of significant transformation. Fee pressure, regulatory demands and technological shifts are reshaping the landscape, while changing investor preferences are challenging many traditional business models.

In response, consolidation within the investment industry is likely to accelerate through the second half of 2025, as investment groups pursue scale, efficiency and fresh growth opportunities.

However, it is not just a story of scale for scale’s sake. The entities to emerge strongest from the current competitive landscape will likely be those able to differentiate offerings, whether through specialist investment expertise, superior client servicing, or technological innovation. Simply becoming bigger, without clear strategic purpose, may not be enough to offset industry headwinds.

One of the most notable recent structural shifts in the asset management industry has been the rise of private markets. From 2014 to 2024, combined assets under management (AUM) across private equity, private debt, real estate and infrastructure strategies grew at a compound annual growth rate (CAGR) of 11.1 per cent. This contrasts against the asset management industry’s 6.5 per cent CAGR for AUM excluding these asset classes, according to BCG research.

“One of the most notable recent structural shifts in the asset management industry has been the rise of private markets”

Fundamental rethink

Global AUM for alternative assets is projected to reach $29.2trn by 2029, according to EY, so it is understandable that traditional asset managers are eying the compelling growth avenue of private markets. However, integrating private and public market capabilities is not straightforward. It requires a fundamental rethink of distribution models, client engagement strategies and operational infrastructure.

While investors are drawn to the prospect of higher returns from alternative managers, advisers are increasingly scrutinising net returns after fees, questioning whether these strategies truly deliver the promised value. This will be a factor to watch as we move through H2.

Nevertheless, we expect to see further transactions in this space, as larger asset managers seek to acquire private market specialists to complement existing platforms. The ability to provide investors with a seamless, multi-asset class investment proposition could become an increasingly important differentiator.

Convergence between asset and wealth management is another structural trend gaining momentum. Asset managers are increasingly looking to extend their reach into high net worth and ultra-high net worth investor segments, recognising growing demand for sophisticated investment solutions beyond traditional public markets.

Private market players, in particular, are keen to expand their wealth management distribution capabilities, given increasing appetite among wealthy individuals for private equity, private credit and alternative investment opportunities.

Technology is playing a key role in making asset and wealth managers more efficient, driving significant investment in the systems supporting middle and back-office functions. As groups increasingly adopt an outsourcing model, many are narrowing the focus on what matters most: delivering outperformance, driving effective distribution and ensuring robust compliance. Everything else is typically best left to specialist third-party providers.

Tomorrow’s successful firms will be those that offer truly integrated wealth and asset management propositions, providing tailored investment solutions spanning liquid and illiquid markets. We expect to see continued deal activity as asset managers acquire wealth management platforms or form strategic partnerships to deepen engagement with high net worth clients.

Spinout success

We also expect a continuation of the long-term cycle of spinouts. The industry constantly experiences a steady stream of successful investment teams breaking away to establish independent boutiques. These firms are often highly specialised, focusing on high-conviction strategies where differentiation is key.

However, not all boutiques will thrive, particularly with rising operational costs and distribution complexities. This could lead to larger asset managers acquiring boutiques that have been unable to gain critical mass, especially those with specialist investment expertise in growth areas.

Together, these trends point to a rapidly evolving asset management M&A landscape. Scale remains essential, but it is no longer a standalone solution. The most successful firms could be those that can combine size with strategic focus, embracing diversification, alternative asset growth, and closer integration with wealth management. The next phase of M&A could be defined by firms that can navigate these shifts with clarity and purpose.

In an industry facing profound structural change, the ability to adapt will be the ultimate competitive advantage.