Report shows how turbulence, high inflation and interest rates, and geopolitical tension have erased AUM gains achieved in 2021
The world’s 500 largest asset managers report their total assets under management (AUM) decreased by $18 trillion by the end of 2022, says a study by the Thinking Ahead Institute. This was a 13.7 percent drop from the $131.7 trillion made in the previous year, marking the first significant drop since the Global Financial Crisis in 2008.
“Throughout 2022, amidst significant turbulence, high inflation and interest rates, and geopolitical tension, investors have faced losses that effectively erased most of the gains achieved during the record-breaking 2021,” says Jessica Gao, director at the Thinking Ahead Institute.
“As we have conducted this research, a common theme throughout our conversations with managers has been to expect a higher-for-longer regime in interest rates in which concerns about inflation and growth remain elevated, suggesting investment managers are not out of the woods yet.”
Japan fares better than other regions
In the report, Japanese managers within the top 500 had a decrease in assets amounting to -5.5 percent which was better than other regions. North American asset managers had a 14.2 percent decrease while those in Europe had a 16.8 percent decrease.
There was also a continued evolution between active and passive assets under management among the largest investment managers as passively managed funds investments accounted for 34.7 percent of the total, which was a 4 percent increase from the previous year. Actively managed assets accounted for the remaining 65.3 percent.
The fall within the equity and bond markets had caused alternative investments to amount to 7.1 percent of assets managed. It also caused the combined equity and fixed income allocation to decrease by 2.4 percent from the stable 79-80 percent share it had over the last decade.
This fall had also impacted the degree of consolidation within the top 20 asset managers as it was difficult for them to have an above average exposure to less liquid asset classes. Consequently, the share of the total assets of firms in the top 20 had decreased from 45.2 percent to 44.2 percent. Year-over-year, their total AUM had decreased to $50.3 trillion.
“The need to consider sustainability issues and adapt to systemic risk means forward thinking and robust investment processes that are able to model and measure risks like never before,” said Gao.
BlackRock continued to be the world’s largest asset manager despite its AUM dropping from $10 trillion to $8 trillion in 2022. It is followed by the Vanguard group with $7 trillion who was still ahead of Fidelity Investments and State Street Global respectively as both had their AUM below the $4 trillion mark.
“Looking ahead, this awareness of system-level risks could offer support to the investment world as it grapples with the generational challenge of climate change impacts and other sustainability issues,” said Gao.
The world’s largest 500 asset managers is a joint research that was annually conducted by the Thinking Ahead Institute in collaboration with Pensions & Investments.
