Strong markets in 2010 help top asset managers

Assets managed by the world’s largest 500 fund managers rose by over 4% in 2010 to around US$65 trillion, continuing a trend from 2009 when assets rose 16% on the prior year. The Pensions & Investments / Towers Watson World 500 research also shows that despite the rises in assets in 2009 and 2010, they are still below 2007 levels of over US$69 trillion. 

Craig Baker, global head of research at Towers Watson Investment, said: “2010 was another good year for most asset managers with the majority posting strong results.  However developments in the second half of 2011 are an important reminder of the fragility and volatility of markets and reflect the weak underlying economic fundamentals and the changing risk appetites among institutional investors.” 

The research, conducted in conjunction with Pensions & Investments, a leading US investment newspaper, reveals that, by number, bank-owned asset managers continue to dominate the top 20, although the number of independent managers in the group grew. There are 11 US-based investment managers in the top 20 managing 60% of these assets, while eight managers are European-based and one is Japanese. 

Craig Baker said: “The largest 20 firms were the main beneficiaries of the rebound and increased their share of total assets to the highest levels since the research began. This was as a result of good market returns, new inflows and performance fees, which combined with reduced overheads will have eased the pressure on asset management firms. While many would have moved back into profitability during 2010, recent market gyrations and the various sovereign debt crises could see these fortunes reversed in 2011.” 

According to the research, asset managers from developing countries have more than doubled their share of total assets to around 4% during the past ten years. During the same period, assets managed by the top 20 managers have almost doubled to around US$26 trillion and now account for around 40% of total assets. 

Craig Baker said: “While currency movements have played a role in these trends, institutional investors are looking for exposure to new growth markets resulting in significant inflows and performance for those managers that are well-placed in these markets.” 

Since 2000, passive assets managed by the largest managers have grown by over 13% annually compared to 6% annually for the top 500 managers as a whole, during the same period. In 2010 passive assets, managed by the largest managers, grew by 9% and their total value of assets under management exceeded US$8 trillion for the first time. 

Craig Baker said: “Investors have continued to move significant assets to passive houses over the years as these institutions have found new ways to provide access to markets at low cost. Most investors still rely on actively managed assets, as a core part of their portfolios, to provide them with some of the additional return they need to repair deficits or grow in a low beta return environment. However, passive assets - including new ways of doing passive - are likely to continue growing given their inherent appeal and suitability for the majority of investors.” 

Some of the main gainers by rank in the top 50 (includes through mergers or acquisitions) during the past five years include Great-West Lifeco (+43 [92 to 49]); BlackRock (+31 [32 to1]); Affiliated Managers Group (+30 [80 to 50]); DZ Bank (+25 [69 to 44]);and BNP Paribas (+21 [29 to 8]).