The globe’s 500 largest asset managers have added almost $30 trillion globally over the past decade, taking the total value of assets under management to $78.1 trillion. With assets of over $2 trillion, BlackRock, Vanguard Group, State Street Global and Allianz Group can call themselves the largest players in the industry.
In a new study by Towers Watson, conducted in conjunction with Pensions & Investments (a US investment newspaper), the researchers explore the key financials and trends in the asset management industry, as well as shed light on the 500 largest players in the sector.
The research reveals that in the past ten years just under $30 billion in assets have found their way into the portfolio of the world’s top 500 managers. Last year the asset base increased by 2.1%, reaching a total of $78.1 trillion. Assets under management for North American firms were $44.5 trillion at the end of 2014, an increase of 5.8% from the previous year. European managers saw their base decrease by 1.5%, to $25.9 trillion, despite growth of 18.6% from UK-based firms taking their assets to $6.8 trillion. Japanese managers ended the year with $3.9 trillion, a decrease in assets of 14.4%.
The representation of the largest 20 and smallest 250 firms within the ranking has increased slowly over the past few years, at the expense of more medium-sized firms. This gives, according to Towers Watson, an indication that investors have been allocating capital to the largest managers, who manage a significant amount of passive and alternative indexation assets, as well as smaller, more ‘boutique’ managers who tend to manage a greater proportion of actively managed strategies. “We observe asset growth at the very large and smaller ends of the size spectrum, but not much in the middle. The big passive houses are the beneficiaries at the large end, while smaller managers are attracting a greater proportion of active mandates as they ‘resource up’ and become more competitive,” comments Luba Nikulina, global head of research at Towers Watson Investment.
An analysis of assets under management by country shows that the landscape has shifted in recent years, with in particular the US gaining terrain. In contrast, asset managers from Japan and some other European markets have lost market share during this period.
According to the research, equity and fixed income assets continue to dominate the assets managed by the top 500 firms. These traditional assets currently make up almost 80% of reported assets (45% in equity, 34% in fixed income), an increase of about 12% from the previous year.
Since 2004, assets managed by the leading passive managers have grown with a CAGR of almost 13% compared to around 5% annually for the top 500 managers as a whole. In 2014 assets managed by the leading passive managers grew by around 12% to reach a record high of over $15 trillion, up from around $4.6 trillion a decade ago. “It is hardly surprising that passive managers continue to attract institutional assets at such a rate, given the competition for seemingly ever-diminishing returns as well as significant innovation in the passive space,” says Nikulina, adding that he cautions investors to look “very carefully” at some of these passive product claims.
Top 30 players
From a company perspective, BlackRock has retained its position as the largest asset manager in the ranking for the past 5 years. Vanguard remains in second position while State Street has moved up the ranking by one position, displacing German conglomerate Allianz which has fallen from third to fourth position. The top 30 are based in just six countries, with the US by a distance leading the pack, followed by UK, Germany and France, while Switzerland and Netherlands have one representative each. Fastest growers in the list – either through organic growth or mergers / acquisitions – are Macquarie Group (116→50), Sumitomo Mitsui Trust Holdings (79→36), Affiliated Managers Group (76→35), Dimensional Fund Advisors (90→49) and Aberdeen Asset Management (70→40).
Looking ahead, Nikulina highlights that the industry has seen a long period of (almost) uninterrupted asset growth, although she warns that the recent slowing of growth is likely to persist. She also points at the challenging environment asset managers find themselves in, with new forms of competition looming around the corner, while trends such as technology and regulation continue to dominate management agendas. “This challenging environment also presents an opportunity for innovative and adaptable investment companies to stand out. This is not only welcome, but essential otherwise the industry is likely to have change thrust upon it,” concludes Nikulina.