The amount of money managed by investment managers around the world is set to almost double in size to US$145.4 trillion by 2025 while the proportion held by active managers will decline from 71% to 60%, according to a report from consultancy firm PwC.
Despite the rapid growth from current total global assets under management (AuM) of $84.9 trillion, the report warns that many asset management firms will need to take urgent action “if they’re to survive an exponential level of change” over the coming years.
The report, “Asset & Wealth Management Revolution: Embracing Exponential Change”, predicts that global AuM will grow by over 6.2% a year to $111.2 trillion by 2020, and then again to $145.4 trillion by 2025.
Europe’s share of global assets will, the report says, grow at 8.4% a year from 2016 until 2020, slowing to 3.4% between 2020 and 2025, lifting assets from $21.9 trillion to $35.7 trillion over the nine years.
Active investments will continue to lose market share to passives and alternatives, the report forecasts, but AuM will increase across all three lines.
The expectation is that the AuM of stock-picking actively-managed funds will climb from $60.6 trillion in 2016 to $87.6 trillion by 2025 while their share of overall global AuM will decrease from 71% to 60% by 2025.
Passively-managed index-tracking funds will gain “huge” market share, rising from 17% of AuM to 25% in 2025 (from $14.2 trillion to $36.6 trillion), while alternatives are set to rise from 12% to 15% as assets increase from $10.1 trillion to $21.1 trillion.
Olwyn Alexander, PwC’s global asset and wealth management leader, said: “Asset managers can take advantage of this massive global growth opportunity if they’re innovative.
“But it’s do or die, and there will be a great divide between few have’s and many have not’s. As a result, things will look very different in five to ten years’ time and we expect to see fewer firms managing far more assets significantly more cheaply.”
©2017 funds europe