Diversification, strong financials underpin global asset managers: Fitch.

Despite the weakening economic outlook and elevated market volatility, large global investment managers are well positioned to ride out these challenges, says Fitch Ratings.

In a new report, the rating agency said global fund managers are facing a growing array of headwinds — largely driven by the U.S. trade war — including increased uncertainty and market volatility, along with the prospect of weaker growth. Together, these forces are pressuring both net flows into investment funds and the valuation of portfolio assets.

As a result, Fitch recently cut the rating outlook for the sector from “neutral” to “deteriorating.”

However, the large global fund managers are well positioned to weather these challenges due to their “well-established and diversified franchises, and robust financial metrics,” it said.

“The importance of franchise diversification in volatile conditions was underlined in 2024 and the first quarter of 2025, when robust flows into passive, wealth management and private asset funds mitigated weaker, more transient flows into mass retail and equity funds,” it noted.

While Fitch expects margins on mass retail funds to continue facing pressure amid “intense competition from lower-fee passive funds” and high distribution costs, it also noted that fund managers are combating these pressures by focusing on strategic growth areas, such as private assets, active ETFs, wealth management, and expanding into emerging markets.

“This should aid business stability but brings execution risks as the investment management industry evolves,” it said.

Additionally, the large global managers generally have strong financial fundamentals, underpinned by solid profitability, healthy margins and low leverage, Fitch said.