Accounting and finance powerhouse PwC believes the asset management industry has a rosy future. They project a compound annual growth rate of 6% for the sector over the next five years, with global investable assets for the asset management industry soaring to over $100 trillion by 2020.
PwC’s recent report Asset Management 2020: A Brave New World also emphasizes that “Asset managers must both create positive social impact and deliver the clear message that they are a force for good, to investors and policymakers.”
Assets in private equity and venture capital strategies have seen significant growth in recent years. In comparison, assets in the hedge fund industry have experienced slowing growth rates. Q2 2021 hedge fund letters, conferences and more Over the six years to the end of 2020, hedge fund assets increased at a compound annual growth rate Read More
Continued steady growth in asset management industry
In 2014, global assets under management (AuM) came to close to $63.9 trillion. Based on a detailed analysis of historical data, PwC anticipates this will rise to $101.7 trillion by 2020, which represents a compound growth rate of just under 6%. In projecting AuM growth, PwC analyzed correlations between AuM and a variety of economic factors over the prior 13 years.
Drivers of growth in AuM
PwC predicts that much of the growth in the global asset management industry over the next few years will come from South America, Asia, Africa, Middle East (SAAAME). The report notes that AuM in the SAAAME economies is expected to grow more rapidly than in the developed world between now and 2020. That said, most assets will still be concentrated in the U.S. and Europe in 2020. Of note, Asia ex-Japan’s AuM representation in the MSCI World Index was only 9% as of 2010, although its total contribution to GDP was close to 18% at the time. According to PwC, Asia ex-Japan’s contribution to GDP is likely to top 25% by 2020.
Another significant driver of growth in global AuM is the continued growth of employer defined contribution schemes, often driven by government-incentivized or mandated transitions to individual retirement plans.
The PwC report also highlights that it is likely that foundations and endowments of all sizes will also continue to expand AuM as the baby boomer generation bequeaths more and more of their wealth. The large majority of these foundations and endowments will, of course, work with global asset managers to earn the highest possible return on their capital.