Growth slows in challenging period for fund managers

Assets managed by the world’s largest 500 fund managers rose by over just 2% in 2014 to reach a new high of US$78.1 trillion, compared to US$76.4 trillion the year before. The Pensions & Investments / Towers Watson World 500researchshows that asset managers have added almost US$30 trillion globally since 2004, despite growth slowing to its lowest rate for a decade.

Luba Nikulina, global head of research at Towers Watson Investment, said: “For the first time we have observed 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.”

The research, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, reveals that in the past ten years the number of independently owned asset managers in the top 20 has more than doubled and now accounts for the majority, overtaking both bank and insurer owned firms which have both declined in the same period. In 2014, there were 11 US-based managers in the top 20 accounting for nearly two-thirds of all assets with the remaining managers all being European-based.

Luba Nikulina said: “We are in the longest period of (almost) uninterrupted asset growth since the research began, albeit growth has slowed dramatically recently. However, headwinds persist not only from markets and the medium-term outlook for the global economy but also regarding asset management’s perceived value proposition and its general role in society. This challenging environment also presents an opportunity for innovative and adaptable investment companies to stand out and we have seen greater flexibility and willingness to engage on these issues than ever before. This is not only welcome, but essential otherwise the industry is likely to have change thrust upon it.”

According to the research, traditional assets make up almost 80% of reported assets (45% in equity, 34% in fixed income), an increase of about 12% from the previous year and now totalling over US$37 trillion. Since 2004, assets managed by the leading passive managers have also grown by almost 13% annually 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 US$15 trillion, up from around US$4.6 trillion a decade ago.

Luba Nikulina said: “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. However we would caution investors to look very carefully at some of these passive product claims, and to not forget that - governance permitting - it is no substitute for real investment skill and good active management.” 

Some of the main gainers by rank in the top 50 (includes through mergers or acquisitions) during the past five years include Macquarie Group (+66 [116→50]), Sumitomo Mitsui Trust Holdings (+43 [79→36]), Affiliated Managers Group (+41 [76→35]), Dimensional Fund Advisors (+41 [90→49]) and Aberdeen Asset Management (+30 [70→40]).

The world's largest money managers

Ranked by total assets under management, in U.S. millions, as of Dec. 31, 2014

Source: P&I/Towers Watson World 500

For more data and information from related Towers Watson Investment research please click here.