A global bull market last year drove the asset management industry to its greatest pace of expansion since the aftermath of the financial crisis, according to the Boston Consulting Group (BCG).
The value of global assets under management rose by 12 percent to $79.2 tn in 2017, up from $71 tn the previous year.
China and the US led the growth, with assets under management in the world’s two largest economies growing by 22 percent and 14 percent year on year, respectively. China rose to be the fourth-largest asset management market with $4.2 tn, with only the US, the UK and Japan larger.
The growth in assets was helped by an almost unbroken rise in the world’s main equity markets over the course of the year, amid one of the most benign periods for the world economy in the last decade. The rise in value of US stocks, in particular, represented a massive increase in global wealth, in spite of fears over richly valued shares.
But the asset management industry’s growth also reflects the massive expansion of the Chinese market, as increasing numbers of citizens require asset management services. BCG expects Chinese assets to triple by 2025, making it the second largest in the world.
The growth was the fastest since 2009, when assets regained some value following their precipitous decline during the global financial crisis, but BCG warns that a strong 2017 should not distract asset managers from the need to adapt in an industry undergoing significant technological change as well as a shift toward more passive management and index-tracking products.
Passive products grew by 25 percent over the year, the fastest pace on record. Yet while they represent 20 percent of global assets, they provide only 6 percent of industry revenues, underlining the fee pressures on managers.
‘Asset managers would be wise to take advantage of a strong year to reinvest capital and talent in future growth,’ says Renaud Fages, a BCG partner who leads the firm’s global asset management practice, in a statement. ‘Most of the bounce-back growth of 2017 was market-driven, not structural. Cost pressures and fee erosion will persist, especially when equity market growth slows, as it shows signs of doing in 2018.’
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