Asset management firms currently have about $64 trillion in investable assets, but that number is predicted to grow to more than $100 trillion by 2020, a compound annual growth rate of more than 6%. Driving the growth will be investments from South America, Asia, Africa and the Middle East.
The prediction comes from a report on the asset management industry by PricewaterhouseCoopers (PwC). The firm believes that asset growth will be driven by three trends:
- Shift individual retirement plans pushed along by government incentives
- Growth in the number of wealthy individuals
- Growth of sovereign wealth funds
According to PwC, the asset management industry managed 36.5% of all assets held in pension funds, sovereign wealth funds and insurance companies, and by wealthy people. The firm believes that by 2020 the industry could boost its share of assets under management to 46.5%.
Retirement funds have grown from $21.3 trillion in 2004 to $33.9 trillion in 2012, and they are expected to reach $56.5 trillion by 2020, more than half the total. Pension funds in the United States and Europe will continue to hold the bulk of the assets, but the growth will come from Latin America and Asia.
PwC considers wealthy people in two categories: mass affluent, with wealth of $100,000 to $1 million; and high-net-worth-individuals who hold wealth of $1 million or more. The wealth of the mass affluent group will more than double by 2020. Worldwide, the growth in mass affluent wealth is predicted to rise by compound annual growth rate of 6.8% and high-net-worth growth is expected to increase at a rate of 3.9%.
Asset management firms currently have about $5 trillion in sovereign wealth funds, and PwC reckons that amount to grow to $9 trillion by 2020. Growth will be fastest in the Middle East, Africa and Asia.
Mutual fund growth over the period to 2020 is predicted at an annual rate of 5.4% from a current total of $27 trillion to $41.2 trillion. Investments managed for institutional investors will grow 5.7% from a 2012 level of $30.4 trillion to $47.5 trillion.