Moody's Revises Global Asset Management Outlook to 'Stable'

Moody's has shifted its 2025 outlook for the global asset management industry from negative to stable, citing anticipated economic growth spurred by lower interest rates. Improved investor confidence and increasing assets under management are expected, although geopolitical risks remain a potential threat to market stability.

Moody's Investors Service has adjusted its perspective on the global asset management industry for 2025, upgrading the outlook from negative to stable. The revision reflects expectations of economic growth driven by lower interest rates and more accommodating monetary policies predicted over the next 12 to 18 months.

The global economic landscape remains conducive to financial market stability. In particular, equity markets have surged over the past two years, mainly attributed to sustained economic growth in the United States. The forecast of continued low and stable inflation, alongside decreasing interest rates, is expected to solidify this positive trend further. Resolution of election-related uncertainties in various regions has additionally contributed to market tranquility, encouraging investors' migration toward riskier asset categories.

Nevertheless, Moody's expresses caution over potential disruptions like geopolitical tensions, trade conflicts, or inflation rate reversals, which could induce market volatility. While asset management firms might face operational challenges due to mounting costs and a shift towards low-fee products like exchange-traded funds, the impressive growth in assets under management from the past year offers a buffer against these issues.

Shifts of funds from low-yield money market accounts to higher-risk, higher-fee asset classes are expected to bolster industry revenues further. Although traditional active mutual funds might witness outflows, thriving markets and a boost in investor confidence could energize other segments such as fixed income, ETFs, and separately managed accounts.

Lower interest rates and a favorable economic climate are poised to invigorate private market investments, prompting increased fundraising and investment activities. Alternative asset managers stand to benefit significantly from an improved deal-making landscape, with heightened realizations expected as a result of less stringent regulations and supportive market settings.

Private credit, part of a swiftly expanding sector due to its alluring yields and fees, is attracting considerable investor interest. The industry's future prospects appear robust, further bolstered by advancements in generative AI technologies, which promise to enhance operational efficiency and scalability, especially for large-scale firms adopting AI.

(With inputs from agencies.)