Retirement Asset Shift in the US Positive for Asset Managers - BCG Report

Matthew Smith

14 December 2006

The juggling of assets between retirement investment vehicles in the US should reaffirm the country’s attractiveness to investment management firms, according to yesterday’s Boston Consulting Group asset management report. The shifting of assets between corporate sponsored defined-contribution and defined-benefit plans into retail IRAs and annuities investment managers in the US has the potential to capture $1.5 trillion, the report states. This is despite evidence that capital inflow growth was driven in the last 12 months largely by growth in Europe and Asia. Assets under management in both Europe and the Asia-Pacific region grew by more than 20 per cent in nominal terms, compared with 9 per cent in the US compared to the same period last year, according to the consultancy. The US market nonetheless remains the largest market for professionally managed assets – those for which a management fee is paid – in the world with more than $22 trillion in assets under management, according to the report. The biggest opportunity asset managers in the US have to grow is if they are able to capture funds as they shift from one type of investment to another, the consultancy said. Andy Maguire, lead author of the report and a Boston Consulting Group vice president said there is less opportunity for asset managers in Western European retirement markets because public policy reforms are proceeding slowly and reliance on state pension schemes remains high. “This situation could change, however, if unit-linked investments and other vehicles that offer greater exposure to market risk become more popular,” said Mr Maguire. Key to asset management firms capturing a piece of the US market will be their ability to shift in step with demographic patterns, the report stated.