Western Europe’s fund management industry cut its cost base in 2008 for the first time in at least a decade, bringing to an end a period of seemingly unstoppable expansion.

But the industry’s new found parsimony was not enough to prevent a 40 per cent slump in operating profits derived from third-party assets to €7.1bn (£6.5bn, $10.5bn), taking earnings back to the level seen in 2004, according to McKinsey’s annual survey.