The global asset management industry hit an all-time high of $ 114.7 trillion in assets under management in 2020, according to a McKinsey report released yesterday.
This made 2020 the second best year since the financial crisis in terms of growth in assets under management, according to the report. It wasn’t just performance driven: New net asset flows increased 2.7% in 2020, down slightly from 2019.
“In North America, 2020 has been a story of the upsurge in US markets in particular, in large part because US media, technology and healthcare companies were over-represented in the economy’s winning circle. global pandemic, ”McKinsey said in the report. .
Yet even as assets have grown, the income and operating profits of asset managers have grown at a slower pace. In North America, assets under management grew 13% last year, while revenues and operating profits grew 7% and 9%, respectively.
McKinsey pointed out that despite market shocks and the prolonged suspension of in-person interactions caused by Covid-19, the asset management industry took some favorable winds as the US economy quickly recovered to its level. before the pandemic.
Among the different asset classes, fixed income products were particularly popular in both passive and active strategies. Net flows to fixed income securities reached $ 257 billion in actively managed funds and $ 230 billion in passively managed funds, according to the report. Fixed income ETFs have gained momentum among major institutional investors “as the resilience of these vehicles in the most volatile days of the pandemic helped allay investor concerns about liquidity,” the report said.
McKinsey attributed the growing interest in fixed income to three factors. On the one hand, the aging of the population in North America means that asset allocations “naturally shift towards more stable performance-oriented assets”. There is also the cyclical factor that prompts investors to “rebalance their portfolios to maintain their target asset allocations”. But more importantly, active fixed income managers have consistently outperformed benchmarks and proven to be a reliable source of performance.
Private markets have also caught the attention of investors during the pandemic, and demand for asset classes like infrastructure, private equity and private debt continues to grow, according to the report. More than half of investors said they plan to allocate more assets to infrastructure in 2021, up from 38% in 2020, because they believe “governments and society will seize the moment of the pandemic and make commitments important to rebuild and renew “.
Active stocks, on the other hand, came under pressure as the asset class exits continued. In 2020, $ 330 billion in assets were taken out of active equity funds because “less than half of active managers outperformed their benchmarks after fees”, up from $ 282 billion in 2019 and $ 231 billion in 2018 .
Looking ahead, McKinsey said the themes that will define the asset management industry in the post-pandemic world will include digitization, policy changes, innovation in business models and concerns about environmental issues. , social and governance.
“As the industry crosses the horizon of this new post-pandemic era, asset managers will need to adapt their models to anticipate upcoming disruptions and embrace a new sense of purpose and innovation as they are heading for a unique decade of growth, ”the report concluded.