One in six asset managers expected to disappear by 2027
The findings from a survey carried out by PwC suggest that 16% of asset management firms will disappear over the next four years, as a wave of consolidation hits the industry.
In its annual Global Asset and Wealth Management survey, PwC found that inflation, market volatility and rising interest rates are driving down fees for asset managers, pushing the rate of turnover for firms to twice its historical rates. As a result, 73% of asset managers said they were considering a strategic consolidation with another asset manager in the near future, to help them gain access to new segments of the market, mitigate risk, and build market share. By 2027, the 10 largest asset managers are expected to control half of all mutual fund assets globally, up from 42.5% in 2020.
Throughout 2022, global assets under management fell almost 10% from $127.5trn to $115.1trn, the biggest decline in a decade. This is expected to reverse by 2027, however, with AUM reaching a record $147.3trn.
PwC Ireland’s global asset and wealth management leader Olwyn Alexander said ‘Against a backdrop of social, economic and geopolitical disruption, existential challenges are sweeping the asset and wealth management industry. The choice is simple: adapt to the new context or fail. Firms who leverage technology like generative AI and robo-advisers effectively, build meaningful inroads to new and existing customers, diversify recruitment, and deliver exceptional client experiences will be well-positioned to, not only survive, but thrive.’ More than 90% of asset managers said they were already using tech like AI and blockchain. Assets managed by robo-advisers are expected to grow from $2.5trn to $5.9trn by 2027.
Individualised indexing is also gaining popularity, with almost 40% of institutional investors planning to invest in custom indexing products and almost half of asset managers expecting to add individualised indexing solutions to their offerings. By 2027, PwC predicts indexed AUM will more than triple to $1.47trn, with active ETF rising from $4.6bn to $1.1trn. Private markets will also continue to surge, to comprise around half of revenues for asset managers by 2027, up from 37.6% in 2020. Meanwhile, passives will represent just 6.4% of revenues, despite accounting for 26.4% of assets under management last year.
Finally, 57% of asset managers expected more and more employees to demand disclosures on their organisation’s impact on the economy, with half demanding disclosures over ESG-related matters. However, only 37% said their employers were working to improve DEI.