PwC says infrastructure costs squeeze asset manager margins

Infrastructure decisions have shifted from back-office concerns to central questions of strategy for asset managers. According to PwC’s report on asset management infrastructure, choices about which capabilities to build, buy or access through partners now influence how these firms compete.

Profit per dollar managed is down 19% since 2018 and is projected to fall a further 9.1% by 2030. Infrastructure providers, meanwhile, expect a larger share of the asset management revenue pool, with some 70% holding that view, and 68% identify hyperscale cloud providers as the main emerging threat.

Among respondents, 24% globally cite data fragmentation and 17% cite legacy systems as major barriers to scaling AI. In North America, data fragmentation is the leading obstacle for 26%, while 21% point to the absence of unified or real-time data pipelines. The report also identifies four emerging infrastructure archetypes: infrastructure orchestrators, digital and tokenisation platforms, specialist modular providers and integrated asset managers.

The findings draw on input from 150 asset managers and 50 infrastructure providers. Sourcing preferences show 44% of asset managers favour hybrid models that combine in-house, bought and partnered capabilities, rising to 46% in North America, where 18% prefer to partner and 16% prefer to build in-house. The report concludes that no single model suits every firm.

Roland Kastoun, Global Asset and Wealth Management Advisory Leader, PwC, said: “The industry's profits per dollar managed have fallen by almost a fifth, and the bill for the pipes keeps rising. The managers who survive the next five years won't be the ones with the flashiest AI, but rather the ones who fixed the so-called boring stuff first.”

Peter Pollini, Financial Services Industry Leader, PwC US, said: “Infrastructure has quietly become one of the most consequential strategic decisions an asset manager makes. The firms that pull ahead won't be those that own the most technology, but those that decide deliberately what to build, what to buy and where a partner can do it better.” Early decisions may help firms manage costs and protect margins through 2030.