NEW YORK, February 10, 2014 - According to Asset Management 2020: A brave new world, a new report from PwC released today, global assets under management (AuM) will rise to roughly $102 trillion by 2020 from a 2012 total of $64 trillion, representing a compound annual growth rate (CAGR) of nearly 6 percent. This forecasted expansion aligns with the findings of the firm’s recently released Global CEO Survey where growth projections among asset management CEOs eclipsed CEOs from numerous other sectors.
AuM in North America is predicted to grow at a CAGR of 5.1 percent to reach over $49 trillion by 2020 (from a 2012 total of $33.2 trillion), exceeding expected AuM for Europe, Asia Pacific and Middle East & Africa combined.
The game changers
As the global asset management industry progresses towards a significant moment in its evolution, PwC has identified six dynamics that should be analyzed and addressed to capitalize on emerging opportunities:
“Amid unprecedented economic turmoil and regulatory change, most asset managers have not had time to bring the future into focus,” said Barry Benjamin, global asset management leader, PwC. “However, as the industry stands on the precipice of a number of fundamental shifts and the potential for significant volumes of assets, there is more responsibility on firms than ever to manage these assets to the best of their collective ability. Strong branding and investor trust in 2020 will only be achieved by those firms that place a premium on transparency, a concrete value proposition to customers, and a firm commitment to avoiding practices that could prompt concerns among investors, regulators and policymakers.”
Overarching trends fueling growth
According to the report, the asset management environment is being reshaped by the convergence of several significant global megatrends including demographic changes, accelerating urbanization, technological breakthroughs and shifts in economic power. At the client level, PwC predicts that global growth in assets will be driven by three key factors:
In 2012, the AM industry managed 36.5 percent of assets held by pension funds, sovereign wealth funds, insurance companies, mass affluent and high-net-worth-individuals. If the AM industry is successful in penetrating these clients assets further, PwC believes that share of managed assets can increase by 10 percent to a level of 46.5 percent, which would represent $130 trillion in Global AuM.
Pension fund assets in North America to reach $30 trillion, more than 50 percent of the global total
PwC estimates that by 2020, pension fund assets in North America will rise by 5.7 percent a year to comprise slightly over $30 trillion (from $19.3 trillion in 2012) of the $56.5 trillion in total global assets. And while Latin America is forecasted to realize nearly 10 percent year-over-year increases in new pension assets for Latin America and Asia Pacific, the largest pools of assets in 2020 are projected to remain concentrated in the US and Europe.
Pace of growth among mass affluent and high-net-worth-individuals (HNWI) in North America slower than SAAAME regions but still significant
Overall, assets held by mass affluent (wealth between $100,000 and $1 million) and HNWI investors (wealth of $1 million or more) are expected to rise to more than $100 trillion and $76 trillion, respectively by 2020, as compared to $59 trillion and $52 trillion, respectively, in 2012.
While emerging wealth economies in the SAAAME regions will likely serve as the dominant catalyst for growth, North America is projected to continue expanding at a solid pace and ahead of expectations for a similarly mature market like Europe. In 2020, North American mass affluent assets are expected to reach $21.7 trillion (from $13.7 trillion in 2012, a CAGR of 4.9 percent) while HNWI assets will likely top $30 trillion relative to $20.1 trillion in 2012 (CAGR of 4.4 percent).
Sovereign wealth funds present a new nexus of opportunity
The size of SWFs is rising fast and their presence in international capital markets is becoming more prominent. AuM for SWFs is 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. This is a significant opportunity for strategic expansion for North American asset management firms that invest in the resources and capabilities required to effectively meet the unique needs of SWFs.
“Responding to the impact of the global megatrends and the game changers we’ve identified will require considerable thought in order to create a great strategy – there is no silver bullet to building the successful asset manager of 2020 and beyond,” said John Siciliano, managing director and strategy lead, asset management advisory, PwC US. “Those that are proactive about developing 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.”
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