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Competition Intensifies As Asset Management Sector Inflows To Decelerate – Study

Editorial Staff

14 October 2022

Organic growth across the global asset management industry for total net asset flows is expected to slow over the next decade as competition heats up, a report says.

The study, from New York-based , says that the compound annual growth rate in asset flows will cool from 3.9 per cent over the last decade to 1.7 per cent from 2021 to 2031.

The predictions are made in a white paper entitled The New Competitive Calculus: Winning with Data-Driven Strategy..

Asset inflows will expand by $18 trillion over the next decade, helping to push total assets under management to a record of more than $170 trillion.

The report says that competition will be more fierce as growth slows. There are three increasingly distinct classes of industry competitors, two of which – expanding incumbents and innovative challengers – dominate the industry’s organic growth. Already, fewer than 100 asset management firms globally accounted for nearly 64 per cent of the industry’s $14.4 trillion-plus in net new flows gathered since 2016.

“Opportunities will be driven by different capabilities and clients – from institutions to individuals, and from the US and Europe towards Asia, especially China,” Ben Phillips, head of Asset Management Global Advisory Services, Broadridge, says in the report.

“While secular changes manifest in different ways, there are still primary drivers that asset managers need to look out for to maximise their growth. The reality is that these changes are creating unmet needs, all of which are opportunities to innovate and reposition themselves for growth.”

Driving forces
The study predicts that individual investors will be the source of 69 per cent of net flows in the coming decade significantly overtaking institutional investors, while private markets will shift from generating 16 per cent of net flows between 2011 and 2021 to 32 per cent of net flows between 2021 and 2031. 

In terms of regions, the report sees net investment flows shifting from the US and Europe towards Asia-Pacific, especially China. Asia-Pacific will account for 42 per cent of net flows between 2022 and 2031, from just 26 per cent between 2012 and 2021.

As individual investors seek to use their portfolios to address a wider array of financial and non-financial objectives, thematic investing is expected to rise. One example is the momentum in ESG and impact-oriented investing, which will account for 27 per cent of net flows during the next decade.

The ways in which firms can stand apart from their peers is changing, with investment performance no longer the main differentiator. Today, there are four major dimensions to how firms look distinctive: Faster product innovation; stronger distribution; more flexible delivery; and better brand building.