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Fee compression at a European asset manager

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A European asset manager has EUR 100 billion of AUM: EUR 60 billion in active equity funds at a fee of 0.60 percent a year and EUR 40 billion in passive funds at 0.10 percent. Costs are EUR 260 million a year. Next year, EUR 6 billion moves from its active funds to its passive funds, and separately markets add EUR 8 billion and net flows add EUR 3 billion to AUM. What are revenue, the average fee, and the margin today, and how much revenue does the mix shift cost?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Revenue = sum of AUM x fee rate by product
- Active: AUM x 0.60 percent
- Passive: AUM x 0.10 percent
- AUM bridge: start + net flows + market moves = end

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Active revenue
What a strong candidate does: EUR 60,000 million at 0.60 percent.
Active revenue (EUR millions): 60,000 × 0.006 = 360
Step 2: Passive revenue
What a strong candidate does: EUR 40,000 million at 0.10 percent.
Passive revenue (EUR millions): 40,000 × 0.001 = 40
Step 3: Average fee
What a strong candidate does: Total revenue of 400 divided by AUM of 100,000, in basis points.
Average fee (basis points): (360 + 40) ÷ 100,000 × 10,000 = 40
Step 4: Operating margin
What a strong candidate does: Revenue 400 minus costs 260, divided by revenue.
Operating margin (percent): (400 - 260) ÷ 400 × 100 = 35
Step 5: Cost of the mix shift
What a strong candidate does: EUR 6,000 million now earns 0.10 percent instead of 0.60 percent.
Revenue lost from the shift (EUR millions): 6,000 × (0.006 - 0.001) = 30
Step 6: AUM bridge
What a strong candidate does: Start 100 plus net flows 3 plus markets 8. The shift between products does not change the total.
AUM at year end (EUR billions): 100 + 3 + 8 = 111

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The manager should grow where fees hold and cut the cost of its passive range, because the shift to passive alone removes EUR 30 million of revenue, 7.5 percent, even as AUM grows to EUR 111 billion. First, today revenue is EUR 400 million at an average fee of 40 basis points, with a 35 percent margin. Second, each euro that moves from active at 0.60 percent to passive at 0.10 percent loses five sixths of its fee. The risk is that markets fall and the EUR 8 billion market gain reverses. As a next step, track fees and flows by product every quarter.

Risks a strong answer names: Markets can fall as well as rise, so the EUR 8 billion market gain may reverse; Cutting active fees to keep clients lowers revenue further.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.