Active Managers Start to Feel the Pain

Even after the shock of the financial crisis, managing other people’s money remained a pretty great business. While banks shed jobs, employment at the largest publicly traded asset managers rose about 20 percent from 2008 to 2015, according to data compiled by Bloomberg. Now top executives at some of the largest fund companies, including Larry Fink at BlackRock and Gregory Johnson at Franklin Resources, are warning that a reckoning is coming.

The pain is focused on companies that emphasize active management—picking stocks and bonds in an effort to beat the market. Those companies haven’t fared well compared with rivals offering cheaper funds that mainly track indexes. Fund executives envision a future of shrinking assets, lower profit margins, and more mergers as companies try to adapt.