Fitch Ratings’ sector outlook for global investment managers (IMs) is ‘deteriorating’ for 2026. Fitch has revised its subsector outlook for Canadian pension funds to ‘deteriorating’ from ‘neutral’. Slowing growth, sticky inflation, ongoing geopolitical tensions, inflated asset valuations and other late-cycle risks will pose greater challenges to the global IM sector next year than in 2025.
Traditional IMs will be affected sooner due to more variable fee and fund structures. Alternative IMs are not immune, but the impact will be lagged because of locked-up capital and longer-term investment horizons.
Canadian pension funds face the same macroeconomic difficulties as IMs, with similar effects on investment performance. They remain supported by captive inflows, long-term investments, strong asset overcollateralisation, and ample liquidity. We expect them to maintain low leverage.
Competition has intensified with more commoditised products facing fee pressure, although more niche strategies are better able to defend higher fee rates. Consolidation is accelerating and larger IMs will benefit given scale advantages, operating leverage in their business models and enhanced diversification in an uncertain and evolving market.
We expect more tie-ups between alternative and traditional IMs in 2026 as they seek to increasingly penetrate the retail and wealth management channels. This growth opportunity will need to be balanced with increased execution and reputational risks.
Fitch expects leverage to remain within rating expectations for most IMs, barring material debt-funded M&A, which would be likely accompanied by accretive fee earnings. This is reflected by nearly 90% of rated IMs having Stable Rating Outlooks. Fitch-rated IMs are mostly investment-grade, with stable business profiles due to well-established, robust franchises.
Source: Reuters
