Asset managers are facing a multi-year adjustment process that will affect earnings and shares, according to analysts at Morgan Stanley. 

The bank’s equity research team listed several “major forces of disruption” impacting the sector on Monday.

An unrelenting macro environment, substitute products, growing regulatory pressures, intense rivalries, demographics and technology are among them.

The factors have squeezed net new money growth among publicly trading asset managers to a standstill, Morgan Stanley data shows, compressing revenues by -3% in 2016 (on average) and shrinking profits by -10% in 2016.

“We expect firms to adapt by evolving their fee structures, introducing new products and solutions, tuning-up performance engines and redefine the active manager’s value proposition,” wrote equity analyst Michael Cyprys in a note to clients.

Rethinking distribution approaches, revisiting capital management policies and seeking partnership/M&A are also options.

Standard Life and Aberdeen Asset Management recently announced plans to merge. 

Henderson and Janus Capital Group agreed to tie-up in October.

“We foresee a multi-year adjustment process that will affect the earnings and shares of publicly traded traditional asset managers,” Morgan Stanley's Cyprys added.

“This process could drive some firms to go private and usher in an era of large-scale consolidation — not without risks.

“The best deals, in our view, will bolster scale while adding investment capabilities and distribution access.”

Globally, Morgan Stanley’s analysts reckon best positioned firms are BlackRock, Blackstone, Invesco, Oaktree Capital, Partners Group and BT Investment Management.