What's going on?

According to investment bank Morgan Stanley, the future of investment management lies in China and �alternative� investments�

What does this mean?

Investment managers typically make money by charging a percentage fee on the total amount of money they look after. As more investors put their cash in popular low-fee �passive� investments, managers can�t charge as much as if they were �actively� investing on customers� behalves. So to grow revenues, investment managers are instead aiming to increase the pool of money they steward.


In a recent report, Morgan Stanley forecasts that there�ll be $7 trillion worth of assets being managed in China alone by 2023 � which will contribute half of asset managers� revenue gains in emerging markets between now and then.

Why should I care?

For you personally: You asked about alternatives�

Recently, several Finimizers asked us how to get involved in alternative investments. Investing in things like real estate � or typically riskier hedge funds and private equity � could seem more attractive for those seeking returns beyond what the stock market�s expected to offer this year. According to Morgan Stanley�s report, your very own investment manager or robo-advisor might have more alternatives to typical stock market investments on offer in the next few years. That said, you could also go it alone: there are several new platforms that help you invest in things like art or property, for example.

For markets: Pressure on investment managers.

Not only are asset managers� fees falling as passive investing becomes more popular, investors who do want hands-on money management are less willing to pay for it, according to Morgan Stanley. The firm predicts that industry revenue from active management will shrink 36% over the next five years, which may explain why the sector�s valuation is at a historical low. The global pressure on the industry�s revenue is also being accelerated by UK financial regulators: they�re proposing a limit on the fees investment platforms can charge investors taking money out.