Key Findings

Geopolitical disruption: The US-Israeli-led war with Iran has caused the largest oil-supply shock in history by disrupting transit through the Strait of Hormuz, testing global equity, bond, and commodity markets. This event highlights permanent geopolitical realignments, weakened international coordination, and rising geoeconomic fragmentation.

Structural business pressures: The industry faces structural fee compression due to the rise of passive strategies and increasing compliance costs. Profitability per AUM is down significantly. Firms are responding by shifting focus from pure beta to specialised, high-conviction alpha, leveraging AI for personalisation, and transforming product lines from mutual funds to active ETFs.

Consolidation and private markets: Industry consolidation is accelerating, particularly through capability-led M&A targeting private markets, real assets, and advanced technology to achieve scale. Private markets are expected to generate over half of the industry’s total revenue by 2030, producing significantly higher profit per $1 billion in assets than traditional managers. Mid-sized firms face the greatest margin pressure, prompting a need for greater specialisation or scale.

The AI imperative: AI is now a strategic focus, transforming front-office functions (e.g., market research, client risk profiling) and back-office compliance activities (e.g., fraud detection, sanctions evasion). While 45% of managers expect AI to create new revenue streams, productivity gains are often “trapped” in legacy processes, requiring investment in data governance and infrastructure to achieve measurable P&L impact.

Cyber and operational risk: AI is a dual-edged sword, serving as a defence enhancer while simultaneously acting as a threat amplifier, capable of supercharging complex cyberattacks, as demonstrated by models like Anthropic’s Mythos. Widespread use of similar systems creates systemic, correlated risk for the financial sector. Operational resilience is a strategic priority due to technology dependence and concentrated third-party risk.

Regulatory dynamics and digital assets: Regulatory environments are diverging, pushing up costs. Regulatory clarity in the US regarding digital assets is boosting confidence and accelerating the introduction of tokenised funds and blockchain-based settlement. Tokenised real-world assets are projected to exceed $100 billion in 2026.

ESG evolution: Sustained demand from younger investors continues despite US political noise. Regulators are prioritising accurate, traceable data to combat greenwashing, with the focus shifting towards decarbonisation of high-emitting companies and leveraging AI to evaluate sustainability reporting.