The industry regained its pre-crisis market share of financial assets soaring to 25.1% of total financial assets, compared to 23.6% in 2012.
A key driver of these results was the performance of financial markets worldwide, where the industry’s total assets under management surged by 13% to an all-time high of €46.4trn (£37.1trn). With the exception of Japan, all regions generated growth, the report concluded.
Europe versus US
The research highlighted clear differences between Europe and the US in both net flows and global profit levels.
Net flows in North America measured 2% and 3% in Western Europe. In Europe net flows were at their highest since 2006, in both retail and institutional spaces.
Global profit levels climbed to historic highs: North American profit pools stood at €26.9bn (£21.5bn), or 18% higher than the 2007 pre-crisis peak. However, Western Europe still is down by 6% from 2007 levels. This compares to a global profit pool average of €46.9bn (£37.5bn), which was up 16%.
Emerging markets
Meanwhile emerging markets saw a clear slow-down in net flows, driven by weaker flows in Brazil and China. These measured just 2.3% in 2013, compared to an average of 6.1% in in the last four years from 2009-2012.
But, although flows slowed down significantly last year against previous years, emerging markets are still generating the lion’s share of growth in global wealth and will continue to do so, according to McKinsey’s research.
Personal financial assets of high-net worth individuals is expected to grow by €21.2trn in the years spanning 2012 to 2020.
In response to emerging market demand asset managers will have to adjust to local needs as flows gather in different classes across the main emerging markets, McKinsey said.
While Chinese institutional investors narrowed their demand to money market funds, Indian investors heavily preferred fixed income funds, the report revealed. Across Asia, banks remain the dominant distribution channel in the retail space, as reflected in the 59% market share. But direct-to-investors opportunities existed in markets such as China, where 42% of retail AUM were distributed directly.
Changing investor needs
Preferences on asset classes and products reveal changing investor needs which asset managers will need to respond to, the report further highlighted.
Globally, investors have shifted away from traditional core strategies. The key four product categories generating growth in 2013 were passive and ETFs, alternatives, solutions and active specialities such as equity specialities in foreign, global, EM, small/mid cap, sector and fixed income specialities in credit, EM, global, high yield, and convertibles.
Meanwhile in Europe investors were increasingly demanding new multi-asset and solutions products. Structured product demand grew by 10% last year, and make up 20% of the alternative asset class. Similarly hedged and alternative mutual funds also were selected by asset managers.
