For nearly two decades, strong market performance has spurred revenue growth. But in 2022, global assets under management fell 10% to $98 trillion. In an era of market uncertainty, rate squeeze, rising costs and technological change, asset managers must transform and build more innovative organizations by following the three Ps:
- Profitability.Optimize costs across the organization, rather than just cutting expenses.
- Private markets.Consider entering the alternative space – which has huge opportunities for growth – and offering private market products to retail and institutional investors.
- Personalization.Implement technologies that enable highly personalized customer experiences and products, such as direct indexing.
The path to transformation is clear and imminently achievable for most. Leaders who act now are more likely to survive and thrive in the next decade.
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For nearly two decades, strong market performance has spurred revenue growth. But in 2022, global assets under management fell 10% to $98 trillion. In an era of market uncertainty, rate squeeze, rising costs and technological change, asset managers must transform and build more innovative organizations by following the three Ps:
- Profitability.Optimize costs across the organization, rather than just cutting expenses.
- Private markets.Consider entering the alternative space – which has huge opportunities for growth – and offering private market products to retail and institutional investors.
- Personalization.Implement technologies that enable highly personalized customer experiences and products, such as direct indexing.
The path to transformation is clear and imminently achievable for most. Leaders who act now are more likely to survive and thrive in the next decade.
Financial Institution
/Report
Global Asset Management 2023
ByChris McIntyre,Sultan Alsubai,Simon Bartletta,Felipe Bianchi,joe carrubba,Peter Czerepak,Dean Frankle,Lubasha Heredia,Bingbing Liu,Gleb Margolin,Michele Millosevich,Miftah Mizan,Edward Palmisani,Ian Pancham,Neil Pardasani,Kedra Newsom Reeves,Jorge Rodolfo,Blaine Slack,Brian Teixeira, eAndrea Walbaum
Reading time: 5 minutes
main conclusions
For nearly two decades, strong market performance has spurred revenue growth. But in 2022, global assets under management fell 10% to $98 trillion. In an era of market uncertainty, rate squeeze, rising costs and technological change, asset managers must transform and build more innovative organizations by following the three Ps:
- Profitability.Optimize costs across the organization, rather than just cutting expenses.
- Private markets.Consider entering the alternative space – which has huge opportunities for growth – and offering private market products to retail and institutional investors.
- Personalization.Implement technologies that enable highly personalized customer experiences and products, such as direct indexing.
The path to transformation is clear and imminently achievable for most. Leaders who act now are more likely to survive and thrive in the next decade.
Oasset Managementindustry has reached a tipping point that will require rethinking theBusiness modelthat has served so well in the past. Market performance has accounted for 90% of the industry's revenue growth for nearly two decades. In 2022, however, rapidly rising interest rates caused stock and bond values to plummet. The result was the second-largest single-year drop in global assets under management (AuM) since 2005. Global AuM fell by $10 trillion, or 10%, to $98 trillion – close to 2020 levels. Net asset flow also fell below 3% for the first time since 2018, reaching 1.6% of total AuM in early 2022, or $1.7 trillion.
With the collapse of a built-in bull market to support revenue growth, pre-existing pressures were exacerbated:
- Central banks' policy of leveraging market appreciation changed to one of slowing growth to fight inflation. The result is that market growth is no longer guaranteed.
- Passively managed low-fee funds have been the main beneficiaries of the market rally over the past decade in the US. Furthermore, the share of passively managed assets in Europe is expected to grow in the coming years.
- Fee compression accelerated, while costs as a share of revenue increased.
- Continued efforts to innovate led to an abundance of new products, but investors gravitated toward products with an established track record. A staggering 75% of global AuM in mutual funds and exchange-traded funds is in products that are at least ten years old.
The only choice is change
The fundamental pressures facing asset managers make it clear: Transformation is needed.
According to our estimates, existing pressures and market expectations are such that, if asset managers simply stay the course, their annual earnings growth will be approximately half of the industry average over recent years (5% versus 10% ). To return to historic levels of profitable growth, asset managers will need to cut costs by 20% overall and shift their revenue mix to generate at least 30% of their revenue from higher margin products.
Embrace the Three Ps
In BCG's 21st Annual Global Asset Management Report, we explore three themes that should focus on approaching leadership for the future.
Profitability.Asset managers must transform their approach to profitability. They can do this by understanding key costs and using various initiatives to optimize costs, rather than just cutting expenses. (See Appendix 1.) These initiatives may include leveling the structure of the organization; correct sizing support functions; and eliminating low-scale, unprofitable products to refocus the business on strong value creation.
Private markets.Companies should pursue alternative high-growth investments and private market opportunities. These continue to be bright spots for the industry. Alternatives accounted for more than $20 trillion in global AuM at the end of 2022. These products also accounted for half of the industry's global revenues, generating more than $190 billion in revenue for the companies offering them. This strong momentum is expected to prevail with a 7% CAGR in alternative assets over the next five years.
For companies looking to enter the alternatives market, there are four main paths:
- build internally
- Buy multiple companies and use an affiliate or boutique structure
- Buy an alternatives company and operate it independently
- establish partnerships
While each path presents its own advantages and challenges, the most important characteristics of a successful alternatives unit revolve less around a company's method of entry and more around its execution. What is important is that the asset manager refines the value proposition, adapts incentives to drive growth, preserves the autonomy of the alternatives team, optimizes distribution and fundraising, and ensures that all parties enter the business with their strategic interests aligned to the highest degree possible.
Personalization.Asset managers must leverage technologies that enable highly personalized customer experiences and products. (See Appendix 2.) New technologies can increasepersonalizationefficiency and effectiveness inSales and Marketingprocess. And if applied correctly, these technologies can lead to an increase in sales conversions of around 20% over traditional approaches.
A major personalization product in the US is direct indexing. Similar to the way streaming services allow music fans to download and mix individual songs instead of buying albums, direct indexing allows consultants and their clients to buy titles one at a time and blend them into individualized portfolios.
Direct indexing technology presents risks, but also opportunities. Asset managers should evaluate the various strategies for accessing customers with this product: partnering with a vendor, building capability internally, or acquiring an existing player.
After years of record growth, the tide has turned. By adopting a transformative mindset and embracing the three Ps – profitability, private markets and personalization – asset managers can meet investor demands and face the future with excellent growth prospects amidst the chaotic economic climate ahead.
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Authors
Chris McIntyre
Managing Director and Partner
new York
Sultan Alsubai
Consultant
new York
Simon Bartletta
Managing Director and Senior Partner
Boston
Felipe Bianchi
Partner
new York
joe carrubba
Managing Director and Partner
new York
Peter Czerepak
Managing Director and Senior Partner
Boston
Dean Frankle
Managing Director and Partner
London
Lubasha Heredia
Managing Director and Partner
new York
Bingbing Liu
Managing Director and Partner
Shanghai
Gleb Margolin
Consultant
Seattle
Michele Millosevich
Director
Milan
Miftah Mizan
Project leader
The angels
Edward Palmisani
Managing Director and Partner
Roma
Ian Pancham
Managing Director and Partner
new York
Neil Pardasani
Managing Director and Senior Partner
The angels
Kedra Newsom Reeves
Managing Director and Partner
Chicago
Jorge Rodolfo
Partner
new York
Blaine Slack
Lead Knowledge Analyst
AC – Chicago
Brian Teixeira
Project leader
Boston
Andrea Walbaum
Knowledge expert, team manager
new York
About the Boston Consulting Group
The Boston Consulting Group partners with leaders in business and society to address their most important challenges and capture their greatest opportunities. BCG pioneered business strategy when it was founded in 1963. Today, we work closely with clients to adopt a transformational approach designed to benefit all stakeholders - empowering organizations to grow, create sustainable competitive advantage and drive impact. social positive.
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FAQs
How many assets under management globally? ›
In a new report 'Asset & Wealth Management Revolution: Embracing Exponential Change', PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025.
Why is asset management growing? ›The global asset management market size was valued at USD 373.69 billion in 2022 and is expected to exhibit a compound annual growth rate (CAGR) of 34.7% from 2023 to 2030. The marketgrowth is attributed to rapid digital change, technological advances, and the efforts of test asset management in the industry.
What is asset management doing? ›As a financial service provider, an asset manager manages the assets of his or her clients. The task includes not only providing professional advice, but also making investment decisions based on each client's investment strategy, risk tolerance and financial situation.
Why does the world need asset managers? ›Asset management supports savers by helping to grow their wealth or to meet their requirements for income and to do so in a risk managed way.
Who is the biggest asset owner? ›The top 5 largest asset owners in 2021 are Government Pension Investment Fund (Japan) with $1.73 trillion, Norges Bank Investment Management (Norway) with $1.4 trillion, China Investment Corporation (China) with $1.22 trillion, SAFE Investment Company (China) with $980 billion and Abu Dhabi Investment Authority (UAE) ...
Who is the biggest asset company in the world? ›| Rank | Profile | Total Assets |
|---|---|---|
| 1. | AT&T | $551,669,000,000 |
| 2. | SoftBank Group Corporation | $413,941,000,000 |
| 3. | Royal Dutch Shell plc | $404,336,000,000 |
| 4. | Microsoft Corporation | $380,088,000,000 |
The asset management industry in 2023 faces numerous complex challenges, from regulatory scrutiny to intense deal competition and high operational costs. And that's in addition to geopolitical tension, the threat of recession, and rising interest rates.
How will asset management look in 2030? ›Enterprise Asset Management Market - The global enterprise asset management market size is estimated to reach USD 19.68 billion by 2030, according to a new study by Grand View Research, Inc., expanding at a CAGR of 16.7% from 2022 to 2030.
Who dominates the asset management industry? ›Together, Vanguard and Blackrock, the world's largest asset management firm, control close to $20 trillion. The assets under their control thus represent nearly a fifth of the entire global asset management industry, which is comprised of thousands of firms worldwide managing $100 trillion in assets.
What are the 3 main asset management types? ›Three of the main types of asset classes are equities, fixed income, and cash and equivalents. For individual investors, these are more commonly referred to as stocks, bonds and cash.
Do asset managers make a lot of money? ›
A reputable asset manager with a lot of assets under management (AUM) has the potential to make several hundred thousand dollars per year.
Can you make a lot of money in asset management? ›As a post-MBA Analyst at a large mutual fund, total compensation might be on par with what post-MBA IB Associates earn: around $250K to $350K. At the Portfolio Manager level, earning potential is around $1.0 – $1.5 million per year.
Who manages the most assets in the world? ›BlackRock is the largest asset manager in the world and the first to manage more than US$10 trillion, according to the report.
What are the challenges of asset management? ›- Little to No Visibility. Without visibility, there is no sure way of determining the inventory of assets in a given location(s). ...
- Warranty Leakage. ...
- Lack of Information Sharing. ...
- Difficult Repair or Replace Decisions. ...
- Asset Servicing Errors. ...
- Time Sink. ...
- Difficult Strategic Decision Making.
Therefore, employees are the most valuable assets an organization has. It's their abilities, knowledge, and experience that can't be replaced. So, going forward, organizations need to place emphasis and importance on the contribution that employees that they have in order to propel themselves ahead.
What is the king of all assets? ›"Cash is king" is a phrase that refers to the superiority of cash over other assets or forms of payment.
What assets are owned by billionaires? ›A billionaire's assets may include cash and liquid investments, personal property such as real estate, jewelry, and cars. Business interests, such as equipment and commercial properties, are also included if the individual holds a personal stake in a corporation.
What is the biggest asset of a man? ›Man's greatest *asset* is the unsettled mind." This is because unsettled minds are a necessary prerequisite for "man to be man - which is more important than merely to live." Adrastus is then revealed to have almost certainly engineered this encounter to correct this misattribution.
What is the number 1 company in the world in terms of value? ›| Ranking of the companies from 1 to 100 | Market capitalization in billion U.S. dollars |
|---|---|
| Apple (United States) | 2,640.32 |
| Saudi Arabian Oil Company (Saudi Aramco) (Saudi Arabia) | 2,292.08 |
| Microsoft (United States) | 2,054.37 |
The first modern mutual fund was launched in the U.S. in 1924. The oldest mutual fund still in existence is MFS' Massachusetts Investors Trust (MITTX), also established in 1924.
What is the richest company of all time? ›
The most valuable firm of all time, the Dutch East India Company, was established in 1602 and had a monopoly on the spice trade in Asia.
What sectors will outperform in 2023? ›- Energy. Information. technology. Health care. Utilities.
- Real estate. Materials. Industrials. Communication. services.
- Consumer. staples. Consumer. discretionary. Financials.
According to Bloomberg data, Bitcoin emerged as the top-performing asset class in Q1 2023, with gains of around 73%, making it the digital currency's best quarter since Q1 2021, where it notably gained 103%, which signalled the onset of the last bull run.
What will be the best performing industry in 2023? ›| Best Performing Sectors | |
|---|---|
| Capital Goods | 18.19 % |
| Technology | 10.24 % |
| Basic Materials | 6.83 % |
| Transportation | 6.49 % |
Global Asset Management Market size was valued at USD 277.42 billion in 2021 and is poised to grow from USD 373.69 billion in 2022 to USD 5455.24 billion by 2030, growing at a CAGR of 34.7% in the forecast period (2023-2030).
How many assets are there in the world? ›The world has never been wealthier—with large variations across countries and households. The global balance sheet and net worth more than tripled between 2000 and 2020. Assets grew from $440 trillion, or about 13.2 times GDP, in 2000 to $1,540 trillion in 2020, while net worth grew from $160 trillion to $510 trillion.
What is the total private equity AUM globally? ›Total private markets assets under management (AUM) reached $11.7 trillion as of June 30, 2022. AUM has now grown at an annual rate of nearly 20 percent since 2017.
How much assets under management? ›Assets under management (AUM), also called funds under management, is the total market value of the securities a financial institution (such as a bank, mutual fund, or hedge fund) owns or manages on behalf of its clients.
What is the golden rule of asset management? ›They are: (1) Use specialist products; (2) Diversify manager research risk; (3) Diversify investment styles; and, (4) Rebalance to asset mix policy. All boringly straightforward and logical.
Who are the largest asset owners by AUM? ›The Government Pension Investment Fund of Japan remains the largest asset owner in the world (US$1.7 trillion) followed by the two largest sovereign wealth funds: Norges Bank Investment Management (US$1.4 trillion) and China Investment Corporation (US$1.2 trillion).
Do asset managers make millions? ›
At the Portfolio Manager level, earning potential is around $1.0 – $1.5 million per year.