Amid heightened economic uncertainty and market volatility, a handful of behemoths are racking up massive assets under management, benefiting from lower costs and wider product offerings, while putting much pressure on the business of middle and smaller players, a new report shows.

Other key challenges include the rise of passive funds, accelerating fee compression, and rising operational costs, according to Rebooting the Global Asset Management Industry, released by Citi Investor Services and CREATE-Research.

The report draws on insights from 269 asset managers from 26 markets, managing a total of US$37.7 trillion in assets under management. Respondents were polled from March to June 2025.

Despite the ongoing challenges, new inter-linked growth drivers are emerging, the report says. Of the respondents, 67% believe that the democratization of private markets will drive organic growth in their businesses over the next three years; 61% cite the advancement of artificial intelligence ( AI ) and generative AI ( GenAI ), and 59% believe that intergenerational wealth transfer from Baby Boomers will contribute to their growth.

While AI and GenAI are expected to reshape operating models, the adoption rate is moderate, with 41% of respondents at the implementation phase of AI, and 26% at the same phase for GenAI.

Nonetheless, a majority of respondents believe that AI and GenAI will significantly impact investment processes, although legacy systems and concerns around data quality, security, and transparency remain key barriers.

Focus on the client

According to the report, a successful business model will have to blend traditional and new approaches with an emphasis on client-centricity, such as tech-assisted personalized portfolios, performance-based fees, and outcome-oriented investing.

Distribution channels and platforms, in particular, are expected to see a marked departure from the status quo. About 67% of respondents see democratized access to private markets as a key feature of a winning business model, and 56% cite diverse investment strategies at the point of sale. Close to half or ( 49% ) bet on direct-to-consumer access and channels.

Meanwhile, outsourcing is linked with organic growth at lower costs. What started as a cost-cutting tactic is morphing into a strategic imperative with outsourcing creating tangible benefits on both the bottom line and organic growth, the report says.

In fact, 59% of respondents note the reduction of unit costs from outsourcing, and 57% acknowledge that it allows top executives to focus on core competencies.

The report further suggests industry service providers will need to advance and develop state-of-the art capabilities and innovate across front, middle, and back-office functions as asset managers continue to outsource in these areas and prioritize core competencies in-house.

To achieve competitive differentiation and remain relevant in the changing landscape, asset managers, particularly small and medium-sized ones, will have to think of new ways to meet their clients' goals.

According to the survey, 66% are focused on becoming their clients’ trusted advisers, and 61% are investing in talent and expertise. On distribution, partnering with asset gatherers is a top priority.