Global assets under management to exceed $100 trillion by 2020: PwC

Emerging markets set to drive growth

TORONTO, Feb. 24, 2014 /CNW/ - Global assets under management (AuM) will rise to around $101.7 trillion by 2020, from a 2012 total of $63.9 trillion, says a PwC report released today. This represents a compound annual growth rate (CAGR) of nearly 6%.

According to Asset Management 2020: A Brave New World, the majority of AuM will still be concentrated in North America in 2020 and will rise to $49.4 trillion in 2020, up from $33.2 trillion in 2012, representing a CAGR of 5.1%.

However, assets under management in the SAAAME (South America, Asia, Africa, Middle East) economies are set to grow faster than in the developed world in the years leading up to 2020, creating new pools of assets that can potentially be tapped by the asset management industry. Clients in SAAAME regions will more than double their wealth between 2012 and 2020.

"The results show that while North America will continue to be an asset management powerhouse, some of the emerging markets are quickly making inroads," says Raj Kothari, National Asset Management Leader and GTA Managing Partner at PwC. "This will create new opportunities for asset managers globally, as their client bases and sources of asset pools expand."

Global AuM growth driven by high-net-worth individuals (HNWIs), pension funds, and sovereign wealth funds

In 2012, the AM industry managed 36.5% 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 making further inroads in this area, and is able to increase their share of managed assets by 10% to a level of 46.5%, this would in turn represent $130 trillion in Global AuM.

The report also suggests that pension fund assets will be a considerable driver of growth, growing by 6.6% a year to reach $56.5 trillion and by 202o (30.1 trillion in the North America). Furthermore, the size of sovereign wealth funds (SWFs) is rising fast and their presence in international capital markets is becoming more prominent. SWFs' AuM now sit above $5 trillion and are predicted to 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.

Some game changers for the asset management industry identified in the study include:

• Distribution redrawn: By 2020, four distinct regional fund distribution blocks will have formed which will allow products to be sold pan-regionally. As these blocks form and strengthen, they will develop regulatory and trade linkages with each other, which will transform the way that asset managers view distribution channels.
• Fee models transformed: By 2020, virtually all major territories with distribution networks will have introduced regulation to better align interests for the end-customer, and most will be through some form of limit on the asset manager from allocating fees to distributors. This will increase the pressures of transparency on asset managers and will have a substantial impact on the cost structure of the industry.
• Alternatives more mainstream: Traditional active management will continue to be the core of the industry but will grow at a less rapid pace than passive and alternative strategies, and the overall proportion of actively managed traditional assets under management will shrink. The report estimates that alternative assets will grow by some 9.3% a year to reach $13 trillion in 2020.

"The asset management industry, in the coming years, will have to address new pressures, expectations and increasing demand for transparency," says Kothari. "Those that demonstrate agility and can respond to the new trends will likely be the most successful and trusted organizations in 2020."

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PwC Canada helps organizations and individuals create the value they're looking for. More than 5,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 180,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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SOURCE: PwC (PricewaterhouseCoopers)

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