AWM: From 'A brave new world' to a new normal

Huge rise in assets and shift in the investor base 

Up until end-2019 global assets grew faster than we expected. Our forecast model in 2014 predicted that by 2020 the AM  industry would manage USD 101.7tn of clients’ assets. In our update in 2017 we increased our estimations for the industry to reach USD 111.2tn AuM by 2020. 

In reality, asset growth grew at a slightly faster clip, posting a 9.0% CAGR from 2015 to reach USD 110.9tn as of end-2019. As expected, this rise in assets was particularly bolstered by pension funds HNWIs and sovereign wealth funds increasing allocations to alternative investments. That being said, there was also an uptake within the retail segment, with an influx of millennials and Gen Z working adults looking to create long term wealth, as well as  baby boomers looking to accumulate wealth from retirement funds.

Figure 1: Global AuM 2015-2020e (USD tn)

Buyers’ market (fee models are transformed)

We predicted that the combination of rising regulatory pressure, the rise of passives and investor scrutiny would cause fee levels and models to be challenged.

In recent years we have seen mounting regulatory pressure that has fostered transparency and fee innovation in the AWM space.This pressure comes not only from regulators, however.  Institutional investors are growing critical of active managers demanding high fees without providing alpha. In response, we have seen managers revamping their fee structures; cutting fees or embracing new innovative fee models in order to increase the attractiveness of their products to investors.

Distribution is redrawn

AWM 2020 predicted that, by 2020, four distinct regional fund distribution blocks (North Asia, South Asia, Latin America and Europe) would have formed, marking a move towards overcoming the fragmented nature of the regional fund industry and allowing for products to be sold pan-regionally.

While we have seen this materialise to a certain extent, the development of passporting and inter-regional distribution blocks has been slower than expected. While we do believe that these efforts will progress in the future, development will likely be slow - given the varied interests of each of the countries and regions and the lack of an economic or political union comparable to the EU. Further, the decline of globalisation amid rising nationalism and inter-regional disputes could further complicate regional distribution.

A New breed of global asset managers

"AWM 2020" predicted that 2020 would see the emergence of a new breed of mega-managers with footprints in both developed and emerging markets. We expected that these managers would have highly streamlined platforms, targeted solutions for customers and stronger and more trusted brands.

Our predictions have partially materialised. We have seen the large industry players holding an even higher concentration of assets – particularly those providing low cost products, strong brand recognition, and digitally enhanced services leading the pack. However, we have not seen an emergence of new mega players within the traditional or alternative asset management industry, with only the major incumbent managers undergoing a notable increase in scale.

Figure 4: Asset concentration within top 10 AWMs (%)