Cutting costs can be quick and easy, but it isn’t a guarantee that you can grow profitability, according to a new report by Boston Consulting Group. Asset managers that BCG tracked in 34 major markets around the world for its study, “In Search of Stable Growth: Global Asset Management 2010,” were able to reduce expenses last year by an average of 7 percent. Yet operating margins were off by 19 percent and net revenues fell by 11 percent. In tough times, the gap between top performers and those further down the scale widens, Boston Consulting Senior Partner Monish Kumar said today at a press program in New York City to discuss the results. The top 20 percent of managers produced 88 percent of net sales last year, while holding just 23 percent of AUM, the report said.

The good news: “As an industry overall, asset management remains an incredibly attractive space,” said Brent S. Beardsley, BCG partner and managing director. Operating margins, boosted by better product mix and higher AUM, were forecast for 31 to 35 percent for this year; it’s not as good as the historic peak of 40 percent back in 2006 but far better than many other businesses.

There’s still plenty of work ahead for asset managers. The report measured the value of professionally managed assets in 2009 at $52.6 trillion, up 12 percent, but only about 1 percent resulted from new net inflows. The playing field is changing.

Private investors are demanding greater transparency, particularly with hedge funds. Beardsley said some clients are telling funds they want their stakes invested separately from other pooled funds. That can drive costs up. There’s also pricing pressure; some new hedge funds are charging a 1.5 percent management fee and a 15 percent performance fee, down from the traditional 2-and-20 pricing, the BCG report says. Profits also are being pressured by the growing popularity of passive investments such as exchange traded funds, although there is “little danger” of actively managed investing falling out of favor, particularly with institutional investors, the report adds.

A range of strategies can help managers navigate the waters ahead, BCG says. A sharpened business model, “making bolder choices regarding products, target markets and distribution,” is recommended, along with considering growth opportunities abroad. Mergers and acquisitions could be worth exploring. (Aspiriant Investment Advisors said Monday it will acquire Deloitte Investment Advisors LLC, the fee-only RIA owned by Deloitte Tax LLP, in a deal expected to close in September.) But for the most part the market has languished this year. “There’s a lot of talking, but not a lot of buying,” Beardsley said. Clients tell him that attractive businesses appear priced too richly, while the less-expensive offerings don’t meet their strategic needs. Kumar believes some good M&A deals can be had. “There are economies of scale and scope to gain if you do it right,” he said, but added, “Putting people-based businesses together is never easy.”