Pictured at the event are (l-r): Mike Greenstein (PwC Global and U.S. Alternative Investments Assurance Leader), William Taggart (PwC Global and US Tax Asset Management Leader), Olwyn Alexander (PwC Asset Management Alternatives Leader) and Andrew O'Callaghan (PwC Asset Management Partner Ireland and member of report Editorial Board).
Research from PwC predicts that global assets under management (AuM) will rise to approximately $101.7 trillion by 2020, from a 2012 total of $63.9 trillion. This represents a compound annual growth rate (CAGR) of nearly 6%.
The report, asset management 2020: A brave new world, also finds that assets under management in the SAAAME (South America, Asia, Africa, Middle East) economies are set to grow faster than in the developed world in the years leading up to 2020, creating new pools of assets that will drive much of this growth in the asset management (AM) industry. However, the majority of assets will still be concentrated in the US and Europe.
PwC predicts that assets under management (AuM) in Europe will rise to $27.9 trillion by 2020, from a 2012 total of $19.7 trillion. This represents a CAGR of 4.4%.
PwC predicts that assets under management (AuM) in North America will rise to $49.4 trillion by 2020, from a 2012 total of $33.2 trillion. This represents a CAGR of 5.1%.
PwC predicts that assets under management (AuM) in the Asia-Pacific region will rise to $16.2 trillion by 2020, from a 2012 total of $7.7 trillion. This represents a CAGR of 9.8%.
Global AuM growth will be driven by pension funds, high-net-worth individuals (HNWIs) and sovereign wealth funds. At the client level, the global growth in assets will be driven by three key trends:
Speaking about Ireland, Andrew O’Callaghan, Asset Management Partner, PwC Ireland, said:
“With total assets currently under management in Ireland of €2.5 trillion and 20,000 people employed directly or indirectly in the industry, Ireland is amongst the top three locations for this industry in Europe. Assets under management in Ireland have the potential to grow to €3.5 trillion by 2020 if the industry remains competitive, develops strong connections with emerging new funds centres and continues to market itself positively. This new growth will likely come from emerging markets in Asia and Latin America. We expect Hong Kong and Singapore to emerge as strong funds centres and develop connections with Ireland, Luxembourg and the UK. The increased globalisation of the industry and the rise of a middle class in emerging markets represent a significant opportunity. Ireland has such a diverse range of funds it is well placed to capitalise on these growth trends in the future. We will continue to benefit as an early adaptor of UCITS; Ireland is also in a great position in the Alternatives space, with over 40% of the world’s hedge funds administered here. In addition, passive vehicles such as exchange traded funds (ETFs) have been very attractive to investors and Ireland’s offering in this area backed by the very efficient and internationally respected tax regime for them have been particularly successful.”
"O’Callaghan cautioned however that “Ireland needs to remain competitive and much of this is in the context of Europe remaining competitive. The danger is that if Europe becomes less competitive for a US fund manager to place their funds than Singapore and Hong Kong then clearly we will be in danger of losing that business. Notwithstanding this, with a 10% share of European assets invested in funds currently and having an excellent base from which to grow, huge opportunities remain for further job creation and progress in Ireland.”
Speaking about the global market, Andrew O’Callaghan continued:
“Amid unprecedented economic turmoil and regulatory change, most asset managers have not had time to bring the future into focus. But the industry stands on the precipice of a number of fundamental shifts that will shape the future of the asset management industry."
“Strong branding and investor trust in 2020 will only be achieved by those firms that avoid making mistakes which resulted in the financial crisis. Asset managers must deliver the clear message to investors and policymakers that they deliver a positive social impact. The efforts required to satisfy investors and policymakers cannot be left to others."
“The coming years will bring the industry higher volumes of assets than ever before which places more responsibility on firms to manage these assets to the best of their collective ability. Asset managers must clearly outline the value they bring to customers while being fully transparent over fees and costs.”
Pension fund assets will reach close to $57 trillion by 2020
PwC predicts pension fund assets will grow by 6.6% a year to reach $56.5 trillion by 2020 from a 2012 total of $33.9 trillion.
In Europe, pension fund assets will grow by 6.2% a year to reach $13.8 trillion by 2020 from a 2012 total of $8.5 trillion.
In North America, pension fund assets will grow by 5.7% a year to reach $30.1 trillion by 2020 from a 2012 total of $19.3 trillion.
In Asia-Pacific, pension fund assets will grow by 9.5% a year to reach $6.5 trillion by 2020 from a 2012 total of $3.2 trillion.
Mass affluent clients and high-net-worth-individuals (HNWIs) in SAAAME regions will drive growth
Mass affluent (those with wealth between USD 100,000 and USD 1m) clients and high-net-worth-individuals (wealth of USD 1 million or more) in SAAAME regions are key drivers of growth. From more than $59 trillion and $52 trillion, respectively in 2012, assets owned by mass affluent and HNWI investors are expected to rise to more than $100 trillion and $76 trillion respectively by 2020. The growth is expected to be higher for the mass affluent sector (with a CAGR of 6.8%) than for HNWIs (4.9%). The single greatest contributor to this surge in mass affluent and HNWI assets is increasing SAAAME wealth. Mass affluent clients in SAAAME regions will, for instance, more than double their wealth between 2012 and 2020.
A more prominent role for Sovereign Wealth Funds (SWFs) in global capital markets.
The size of SWFs is rising fast and their presence in international capital markets is becoming more prominent. SWFs’ AuM are currently above $5 trillion and PwC predicts this figure will surge to nearly $9 trillion by 2020. SWFs based in the Middle East and Africa will grow the fastest, with Asia Pacific also seeing a rapid rise in SWF assets.
Asset managers will need to respond
PwC has identified six gamechangers that asset managers will have to analyse and address in order to capitalise on the opportunities this changing landscape presents:
Andrew O’Callaghan continued:
“The response to the gamechangers we’ve identified will require considerable thought in order to create great strategy – there is no silver bullet to building the successful asset manager of 2020 and beyond."
“The successful asset managers of 2020 will have already started to shape their responses to some or all of these gamechangers. Those that develop coherent strategies and act with integrity towards clients are likely to build the brands that are not only successful in 2020, but that are still trusted in 2020.”
Notes to editors:
Expected growth in other regions:
Middle East & Africa
PwC predicts that assets under management (AuM) in the Middle East and Africa will rise to $1.5 trillion by 2020, from a 2012 total of $0.6 trillion. This represents a CAGR of nearly 12%.
PwC predicts that assets under management (AuM) in Latin America will rise to $6.7 trillion by 2020, from a 2012 total of $2.6 trillion. This represents a CAGR of 12.5%.
Sovereign Wealth Funds are reserves operated by Governments to meet future liabilities of that country – for example in Ireland the National Pension Reserve Fund.
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