UK and European asset managers aren’t matching up to their global peers according to Macquarie Bank.

Analysts at the firm screened over 500 investment companies globally, focusing on earnings growth, profitability measures, capital, strength liquidity and balance sheet risk.

Overall, they concluded that UK and European fund houses “do not screen strongly” due to fragmentation, a regulatory focus on price transparency and capital markets reform.

Mifid II, the slew of EU market reforms due to take effect in January 2018, is cited as one of their biggest challenges.

“The main concern is on operating margins especially for retail asset management from greater fee transparency,” analyst Neil Welch wrote in a note to clients.

“We also envision potential changes to institutional asset management market share emanating from Mifid II, which is to look at the role of investment consultants and vertical integration in the pensions market.”

Meanwhile soon-to-be-released findings from the FCA's investigation in the asset management industry is creating "significant uncertainty" for UK investment companies seeking to replace a "lost quarter" of fund flows between April and June caused by Brexit.

Given the challenges, experts at Macquaire suggests that synergies could be useful.

Henderson and Janus Capital group have recently announced plans to merge. There have also been deals between Fiera/Charlemagne, Eaton Vance/Calvert and Man/Aalto.

In terms of growth opportunities, Welch notes the industry sees index products as the way forward.

However, he believes second level growth opportunities, such as Asia and alternatives, are more attractive.

The analyst has placed an underperform rating on Schroders, Aberdeen and Jupiter.

He favors Liontrust and Mattioli Woods and has a neutral view on Man Group, Henderson and Ashmore.

Americas fares well in Macquaries analysis, led by Canadian and US listed companies. Fifth Street and BlackRock are top picks.

Magellan Financial and Perpetual are viewed positively in Asia.