The investment industry is entering a new age. Tougher competition, tightening margins and stringent regulatory oversight are putting pressure on fund managers. At the same time, institutional investors are demanding diversification in the face of continued market volatility – and all while expecting better governance and higher standards.

Amid the complexity, Carne’s second annual Change report tells a story of both headwinds and tailwinds – fund managers and institutional investors alike are predicting a growth fuelled year ahead despite facing these mounting pressures. We surveyed 251 C-suite fund management executives and 200 institutional investors, collectively responsible for $4.6 trillion assets under management, on their strategy for the year ahead.

Change 2025 is essential reading to navigate tomorrow’s opportunities.

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Change 2025: A story of headwinds and tailwinds

John Donohoe, Founder and CEO of Carne Group

Optimism prevails

Earlier this month, alongside PwC and Dechert, I was part of the opening panel discussing emerging industry trends for the year ahead at Funds Congress. It was fascinating to see much of the conversation in the room of almost 1000 industry experts, are replicated in the results of our annual report.

Change 2025 demonstrates how uncannily aligned fund managers and institutional investors are when it comes to growth. 81% of fund managers expect a significant increase in inflows this year, and 84% predict more fund launches than in 2024.

For 2025, nearly four times the proportion of fund managers predict a dramatic increase in the number of launches (42%) compared to just 14% of those surveyed last year, showing, in my view, real confidence and buoyancy.

Risk rewarded

That bullishness flies in the face of how tumultuous the markets remain. Eight in ten (83%) of institutional investors tell us they expect increasing volatility, but that seems to go hand in hand with a bolder approach: 69% think their organisation’s appetite for risk will be higher this year.

Alternative fund managers are arguably enjoying market conditions the most. This year’s survey results show big increases in asset ownership growth from high-net-worth individuals and retail investors, likely driven by regulatory changes.

Competition within private markets is also getting fierce as managers need to show how they can deploy funds effectively at attractive margins. This is becoming harder to do with more money now chasing deals and investment opportunities – which means reduced returns. In addition, the time taken to realise investments is delaying the return of capital.

The result? Managers are looking to other sources of new capital, in particular, the wealth sector, where there is significant and growing demand for private market opportunities, as well as a greater focus on their operations and business models as they look to make further improvements in their levels of efficiency to improve their P&Ls.

Fighting consolidation

2024 saw prominent M&A deals – Manulife’s acquisition of CQS and BlackRock’s Global Infrastructure Partners (GIP) acquisition which followed later in the year being a couple of examples. Survey respondents indicate that consolidation is applying

pressure. 88% of fund managers expect consolidation to increase, but we also see that smaller firms expect to ride out the squeeze by leveraging the scale of third parties for regulatory compliance and to meet investor standards.

Higher standards

We also see governance at the top of the agenda for institutional investors. 87% say they have rejected a fund manager over governance concerns. But they also say standards are improving across the board. In fact, meeting higher standards and improving transparency was the biggest reason fund managers gave us for outsourcing to third-party providers.

Across the board outsourcing ‘non-core’ yet critical functions continue to be a means to achieving investors’ service expectations, as well as relieving the regulatory burden, and we note a natural increase in the data towards the use of third-party specialists

Our report, based on 451 leaders in asset management, paints a vivid picture of an industry both assured of growth potential and in flux – competing on scale, transparency, cost and governance.

What a time to be in asset management!

If this analysis has resonated with you, we would be delighted to discuss the survey results in the context of your own experiences – please reach out via contact@carnegroup.com

Download the full report to learn more.