Global Assets under Management set to double in size by 2025

31 October, 2017

Assets under Management in Ireland could grow from €4 to 7 trillion

Global Assets under Management (AuM) will almost double in size by 2025, according to PwC's latest research. The report, ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, predicts rapid growth from US$84.9 trillion in 2016, to US$145.4 trillion by 2025. But it also warns that firms should take action now, to survive this exponential level of change.

"Asset managers can take advantage of this massive global growth opportunity if they are innovative."

Olwyn Alexander, PwC’s Global Asset & Wealth Management Leader PwC Ireland

Olwyn Alexander, PwC’s Global Asset & Wealth Management Leader and Partner, PwC Ireland Asset & Wealth Management Practice, said: “Asset managers can take advantage of this massive global growth opportunity if they are innovative. But it’s do or die, and they must take action now. This industry will look very different in five to ten years’ time and we expect to see fewer firms managing far more assets significantly more cheaply.”

In Ireland alone, PwC projects that Assets under Management have the potential to grow to US$8.2 trillion* (€7 trillion) by 2025, from US$ 4.7 trillion(€4 trillion)  in 2016.

Ms. Alexander said: “With an economy that continues to grow at above EU average GDP levels, we remain very confident about the future growth capacity for Ireland’s funds industry. Shifts in global investment patterns to passive and alternatives, where Ireland punches well above its weight, will further fuel growth in Ireland. However, with the uncertainties caused by Brexit and other geopolitical challenges, we cannot be complacent.

Technology, and particularly the rise of AI and robotics, provides great opportunities to further manage the cost base and deliver even better products to consumers. PwC’s 2017 Irish FinTech report, for example, revealed that Irish Asset and Wealth managers view increased innovation in research tools and analytics for better decision making and automation as less important compared to global peers. The Irish Asset & Wealth Management industry, like its global counterparts, also needs to fully leverage technology to enable it to forge ahead."

Ms. Alexander recommends that the industry takes action in three main areas:

  1. Asset and wealth managers must be prepared for success in some areas and failure in others. This means they should reorganise their business structure to support their differentiating capabilities and to cut costs elsewhere.
  2. Every firm must embrace technology, as it impacts all functions and will determine if they win or lose in this fast-changing landscape.
  3. Different skills are needed, backed by new employment models. Finding, nurturing and retaining the right people will be absolutely vital as the industry reinvents itself.

Key findings of the report include:

  • By 2025, AuM will have almost doubled – rising by 6.2% a year, from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the fastest growth seen in the developing markets of Latin America and Asia Pacific.
  • While active management will continue to grow and play an important role, reaching $87.6 trillion by 2025 (60% of global AuM), PwC predicts growth in passive management to reach $36.6 trillion by 2025 (25% of global AuM).
  • Alternative asset classes – in particular, real assets, private equity and private debt – will more than double in size, reaching $21.1 trillion by 2025, accounting for 15% of global AuM.
  • There will be a ‘great divide’ between asset and wealth managers who have acted to ensure they are fit for growth, and those who have not.
  • The industry’s involvement in niche areas such as trade finance, peer-to-peer lending and infrastructure will dramatically increase as it helps to fund the future.

ENDS

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