World's Largest Asset Managers on Quest for $100 Trillion in Assets
The next six years should be great years for the money management business, with assets under management reaching more than $100 trillion. This growth, according to a report from PricewaterhouseCoopers, will come primarily from pension funds, high-net-worth individuals and sovereign-wealth funds. While assets from the United States and Europe will still comprise the bulk of assets under management, look for rapid asset growth from South America, Asia, Africa and the Middle East.
The numbers are so big that money managers will see their share of the business grow about 6% a year from 36.5% of assets at the end of 2012 to 46.5% by the end of 2020.
But money managers will deal with a far more complex environment, particularly managing pension funds, assets of which grew nearly 60% between 2004 and 2012 and an additional 67% by 2020. A big reason is that the pension plans increasingly will be direct-contribution vehicles, where workers divert a percentage of their earnings into retirement accounts. Defined benefit plans will not go away; they will not grow much either.
These new retirement assets will come from what PricewaterhouseCoopers calls the mass affluent — those with net worths from $100,000 to $1 million. Their wealth will double between now and 2020. But high-net-worth individuals, with wealth in excess of $1 million, will have been investing more, too. The study sees their assets growing about 3.9% a year.
Also expected to grow rapidly are sovereign-wealth funds, built on revenue from, say, oil or other resources. Investments managed for institutions will grow some 5.7% a year from $30.4 trillion to $47.5 trillion.
According to financial consulting firm Towers Watson, total assets managed by the world’s largest 500 fund managers rose by over 8% to $68 trillion in 2012. The following were the biggest managers at the end of 2012.
BlackRock, United States, $3.79 trillion under management at the end of 2012 and about $4.3 trillion now. BlackRock Inc. (NYSE: BLK) runs the iShares family of exchange traded funds. Its Aladdin Trading Network monitors more than 30,000 investment portfolios (its own and those of others), representing more than 7% of the world’s financial assets.
Allianz Group, Germany, $2.45 trillion. It owns California-based PIMCO, the world’s largest operator of bond funds. PIMCO’s co-CEO Bill Gross also runs the company’s Total Return Fund, which has more than $230 billion in assets alone.
Vanguard Group, United States, $2.2 trillion. The Malvern, Pa., company has huge businesses in exchange traded funds and mutual funds. Founder John Bogle, who started the company in 1975, is credited with creating the original index fund.
State Street Global Advisors, United States, $2.09 trillion. State Street Global, the management arm of State Street Corp. (NYSE: STT), is best-known for its business focused on institutional clients, but it has a sizable retail business.
Fidelity Investments, United States, $1.89 trillion. Fidelity is one of the largest mutual-fund companies and is best-known for the Contrafund, Magellan and Growth and Income funds. It is still controlled by the Johnson family of Boston, who founded the company in 1946.
Axa Group, France, $1.47 trillion. Among its holdings is New York’s AllianceBernstein, which runs about $444 billion.
J.P. Morgan Asset Management, United States, $1.43 trillion. The asset management business of J.P. Morgan Chase & Co. (NYSE: JPM) has operations in Europe, Asia and Brazil. It offers retirement plans and management advice to institutions, and many will be watching how this role adapts or changes under new regulatory pressure ahead.
Bank of New York Mellon, United States, $1.39 trillion. Bank of New York Mellon Corp. (NYSE: BK) is best known for its custodial business, the largest in the world. Its money-management business includes Dreyfus Corp., one of the biggest mutual fund companies. Its wealth-management business focuses on wealthy families and family offices, foundations and endowments, as well as professionals and institutions.
These figures above come to a whopping $16.7 trillion just from these few firms. Much of the asset growth out to 2020 will be widespread among up-and-coming firms. Still, it seems as though there is a lot of future assets for the biggest firms mentioned here.