The 500 largest asset managers grew their assets under management by 12.5% in 2023 to reach $128trn, recovering from a 13.7% fall in 2022, according to the Thinking Ahead Institute.
While AUM has still not fully returned to it 2021 levels, last year saw significant progress from the $18trn loss in 2022. As money flows back into the market for the top asset managers, passive investment strategies have widened their share of the market, now making up over a third of assets under management.
Though 66.3% of AUM remains in active strategies, passive now makes up its largest percentage of AUM on record.
Jessica Gao, director at the Thinking Ahead Institute, said: “We have continued to see net flows into passive strategies as they continue to offer a compelling value proposition, particularly in terms of lower fees and simplicity.
“Yet growing market volatility and issues with concentration, which typically highlights the need for expertise to outperform benchmarks, may be a source of caution from some allocators to passive market trackers.”
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By asset class, equity and fixed income remain the dominant duo, accounting for 48.3% and 29% of AUM, respectively. But this has inched down in the past year, with a decrease of 0.2%, with slightly more attention towards alternatives.
North America continued as the dominant region, bolstered by the US, with a 15% increase in AUM. The region now accounts for 60.8% of AUM for the top 500 mangers, and 14 of the top 20 largest managers are US firms. However, Europe also showed substantial growth in the year, increasing its AUM by 12.4%.
“Macro factors have played a key part in the story, with notable highs in interest rates during 2023 exerting varied pressure on different asset classes, geographies and investment styles. As this now gradually switches to a rate cutting environment, equity markets are beginning to return positive performance also driven by improving expectations of earnings growth. Uncertainties looking ahead are now focused on geopolitical events and several major elections,” Gao said.
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BlackRock has maintained its position as the largest asset manager, holding over $10trn in total assets. Vanguard follows at $8.6trn, with Fidelity Investments at $4.6trn. The top UK-based company is Legal & General Group, with $1.5trn in assets.
Gao added: “Asset managers continue to face major pressure to evolve their own business models. Investment in technology remains essential not just to maintain a market edge, but also to meet evolving client requirements and expectation in reporting and customer service. Increased competition, fee compression, and the growing demand for more personalised, technology-driven investment solutions are challenging traditional structures. We have witnessed notable successes of independent asset managers versus many of the more affiliated insurer-linked vs bank-linked asset managers.”
