More than two-thirds of the revenue growth made last year came on the back of market performance, not underlying growth in wealth – raising concerns about vulnerabilities to falling markets and other forces, Boston Consulting Group said.

 The global asset management industry grew to a record-breaking $128 trillion in assets under management in 2024, a 12 per cent increase from the previous year, according to Boston Consulting Group. 

The figure marks a rebound from the decline it suffered in 2022, but the recovery belies mounting structural pressures that demand urgent reinvention, BCG said. 

Its annual report, titled From Recovery to Reinvention, reveals that more than 70 per cent of the industry’s $58 billion in revenue growth in 2024 was driven by market performance rather than investor inflows, suggesting that the sector could be vulnerable if markets decline – which they have this year, accelerating after the US tariff shock of early April. 

Persistent fee compression, shifts in investor preferences, and digital disruption also force asset managers to change business models, the report said. 

Looking ahead, asset managers have two ways of winning in an evolving product and distribution landscape. First, BCG said, they can claim a larger portion of a shrinking but important pool of actively managed assets specifically, in active exchange-traded funds (ETFs), model portfolios, and separately managed accounts. 

Second, they can prepare to deliver private assets to retail clients. 

Active ETFs are entering a high-growth phase, the report said. In 2024, 44 per cent of all newly-launched ETFs were actively managed, and the category has grown at a compound annual growth rate of 39 per cent over the past decade. Although still a small slice (6.5 per cent) of ETF AuM, active ETFs offer “compelling value” for investors – charging just 0.64 per cent in fees on average compared with 1.08 per cent for mutual funds.

Retail access to private markets represents a “major frontier.” Semi-liquid private asset funds have grown more than fivefold in the past four years and now exceed $300 billion in net asset value. BCG said this growth is being driven by rising demand for higher risk-adjusted returns and long-term performance. 

But distribution to retail clients requires overcoming regulatory hurdles, addressing product design complexity, and expanding investor education, it said.

Consolidation and change
In a study of 270 asset managers, BCG found that the average asset manager doubled its AuM from 2013 to 2023. Those overseeing the largest amount of assets can drive costs down through technological synergies, streamlined operations, and process efficiencies, while those managing less than $300 billion must emphasise leaner models.

For an asset manager's stress operational efficiency, enhanced decision-making, and client engagement, AI has emerged as a key accelerator. 

“GenAI is transforming process automation and product delivery – especially in complex areas such as illiquid and alternative assets – and is now being deployed across the front, middle, and back offices,” it said.

“Cost discipline is now strategic,” Renaud Fages, a managing director and partner at BCG and a co-author of the report, said. “Winning firms are asking tough questions about where they can create unique value and where they must be radically lean. They will also double down on strategic technology initiatives that have transformative potential.”