Global assets under management set to rise to $145.4 trillion by 2025
PwC predicts more more assets will be managed by a fewer number of companies in the future as different tools help the industry work better
In a new report ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025.
While the report predicts rapid growth for the asset and wealth management industry, it also warns that firms needs to take action now, if they’re to survive an exponential level of change.
Olwyn Alexander, PwC’s Global Asset & Wealth Management Leader, says: “Asset managers can take advantage of this massive global growth opportunity if they’re innovative. But it’s do or die, and there will be a ‘great divide’ between few have’s and many have not’s. As a result, things will look different in five to ten years’ time and we expect to see fewer firms managing far more assets significantly more cheaply.”
Nigel Brashaw, Partner at PwC Middle East, adds: “We are predicting the fastest global percentage growth of AuM in the Middle East region through 2020 and for Sovereign Wealth Funds globally to experience the fastest AuM growth of any asset class through 2025.
“Asset managers of all kinds in the Middle East will be profoundly affected by the trends in digital technologies necessary to create alpha and the opportunities offered for technology to reduce operational costs. Organisations will need to ensure that their strategies will drive the capabilities necessary to remain competitive in a relentlessly competitive global market”
While active management will continue to grow and play an important role, reaching $87.6 trillion by 2025 (60% of global AuM), PwC predicts growth in passive management to reach $36.6 trillion by 2025 (25% of global AuM).
Olwyn Alexander further comments: “The industry must act in three areas. First, asset and wealth managers must be prepared for success in some areas and failure in others. This means they should reorganise their business structure to support their differentiating capabilities and to cut costs elsewhere. Second, every firm must embrace technology, as it impacts all functions and will determine if they win or lose in this fast-changing landscape. And thirdly, different skills are needed, backed by new employment models. Finding, nurturing and retaining the right people will be absolutely vital as the industry reinvents itself.”
Asset managers need a keen eye for the technological developments that will be driving exponential change.
Machine learning and AI are set to change the way research and portfolio management is conducted and Robotic Process Automation will revolutionise the back and middle office, while blockchain could have a profound impact on the services industry.
They must design new products and services that meet changing needs. This vital social role is also one of the reasons why regulators around the world are making sure that fees are fair and advice is suitable.