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U.S. asset managers increased their share of assets from 41% to over 50% during past decade

Assets managed by the world’s 500 largest fund managers rose by almost 12% to reach a record $76.5 trillion in 2013, surpassing the previous high of over $69 trillion set in 2007. The Pensions & Investments/Towers Watson World 500 research shows that due to consistent growth of assets in the past six years, total assets have now more than doubled since 2002.

“The year 2013 was clearly another good one for most large asset managers, regardless of the types of assets under management, resulting in new records across the board,” said Brad Morrow, head of research in the Americas at Towers Watson Investment. “While the industry looks healthy, there is no room for complacency given numerous ongoing challenges, including the medium-term outlook for the global economy, where we see risks to global growth skewed to the downside. In addition, asset managers, particularly large ones, are increasingly likely to come under scrutiny for their role in society and the value they add to investors’ portfolios net of fees.”

The research, conducted in conjunction with Pensions & Investments, a leading U.S. investment newspaper, reveals that in the past 10 years, the number of independently owned asset managers in the top 20 has more than doubled and now accounts for the majority, overtaking bank- and insurer-owned firms, which have both declined in the same period. In 2013, there were 12 U.S.-based managers in the top 20, accounting for two-thirds of all assets, with the remaining managers all being Europe-based.

“The shape of the asset management industry has changed significantly in the past decade, with fewer bank-owned managers in existence, as they have been forced to focus on the pressing issues of risk reduction and capital adequacy. As such, during this time, there have been a number of high-profile sales that have impacted where assets are domiciled, and the U.S. has been the biggest beneficiary of this trend,” said Morrow.

According to the research, U.S. asset managers have increased their share of assets from 41% to over 50% during the past decade, mainly at the expense of Swiss, Japanese and U.K. asset managers, which have lost around 5%, 4% and 2% of market share, respectively, and now have 4%, 6% and 8%, respectively.*

Since 2003, assets managed by the leading passive managers have grown by over 12% annually, compared to around 6% annually for the top 500 managers as a whole. In 2013, assets managed by the leading passive managers grew by over 16% to reach a record high of over $10 trillion, up from $3 trillion a decade ago.

“The growth of passive assets globally is a direct result of more institutional investors acknowledging that success in active management without significant governance capability is less likely because of increased competition for seemingly ever-diminishing returns,” said Morrow. “At the same time, there has been significant innovation in the passive space, which has resulted in many low-cost, systematic approaches across a range of asset classes also known as smart beta. When we coined the phrase, it was in the context of targeting beta opportunities smartly, but has since become an industry buzzword for all sorts of inexpensive, passive products. So we would caution investors to look very carefully at some of these product claims and not forget that there is no substitute for real investment skill and good active management.”

Some of the main gainers by rank in the top 50 (including those achieved through mergers or acquisitions) during the past five years include Schroder Investment management (+44 [87→43]), Affiliated Managers Group (+43 [81→38]), Royal Bank of Canada (+28 [77→49]), T. Rowe Price (+27 [54→27]) and Sumitomo Mitsui Trust & Bank (+26 [59→33]).

The world’s largest money managers

Ranked by total assets under management as of Dec. 31, 2013

              Rank   Manager   Country   Total assets 1   BlackRock   U.S.   $4,324,088 2   Vanguard Group   U.S.   $2,752,919 3   Allianz Global Investors   Germany   $2,392,531 4   State Street Global   U.S.   $2,344,789 5   Fidelity Investments   U.S.   $2,159,845 6   J.P. Morgan Chase   U.S.   $1,601,983 7   Bank of New York Mellon   U.S.   $1,582,982 8   AXA Group   France   $1,532,156 9   Capital Group   U.S.   $1,338,805 10   BNP Paribas   France   $1,325,176 11   Deutsche Bank   Germany   $1,270,602 12   Prudential Financial   U.S.   $1,107,029 13   UBS   Switzerland   $1,095,904 14   Amundi   France   $1,069,771 15   Goldman Sachs Group   U.S.   $1,042,000 16   HSBC Holdings   U.K.   $ 921,000 17   Northern Trust Asset Mgmt.   U.S.   $ 884,473 18   Franklin Templeton   U.S.   $ 879,139 19   Natixis Global Asset Mgmt.   France   $ 867,193 20   Wellington Mgmt.   U.S.   $ 834,405      

Source: P&I/Towers Watson World 500

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

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*Market share is influenced by currency movements during the period.

Media:Ed Emerman, 609-275-5162eemerman@eaglepr.comorBinoli Savani, 703-258-7648binoli.savani@towerswatson.com