Top investment managers’ assets reach record levels

Thierry de la Noue, senior investment consultant at Towers Watson in France, said: “2013 was clearly another good year for most large asset managers, regardless of the types of assets under management, resulting in it setting new records across the board. While it looks like an industry in rude health, there is no room for complacency given numerous on-going 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 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 account for the majority, overtaking both bank and insurer owned firms which have both declined in the same period. In 2013, there were 12 US-based managers in the top 20 accounting for two-thirds of all assets with the remaining managers all being European-based.

Thierry de la Noue said: “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 which have impacted where assets are domiciled, and the US has been the biggest beneficiary of this trend.”

According to the research, US asset managers have increased their share of assets in the research from 41% to over 50% during the past decade, mainly at the expense of Swiss, Japanese and UK asset managers who have lost around 5%, 4% and 2% of market share [1] 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 US$10 trillion, up from US$3 trillion a decade ago.

Thierry de la Noue said: “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. 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 buzz-word for all sorts of inexpensive passive products. So we would caution investors to look very carefully at some of these product claims, while not forgetting that 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 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]).