In four years, PwC expects the top 10 asset managers to “control around half of all mutual fund assets globally.”
Grygo is the chief content officer for FTF & FTF News.
All of a sudden, asset and wealth managers are facing an existential crisis.
That’s what a key survey of asset and wealth managers has revealed, according to a report from PwC.
“One in six (16 percent) asset and wealth managers globally are expected to be swallowed up or fall by the wayside by 2027, twice the historical rate of turnover,” declares PwC via its 2023 Global Asset and Wealth Management Survey, released early last month.
“The report, based on PwC’s latest industry projections and a survey of 250 asset managers and 250 institutional investors, paints the picture of an industry grappling with a set of challenges — digital transformation, shifting investor expectations, consolidation, and ‘retailization,’ ” according to the survey.
The report does offer industry participants a path forward.
“Existential challenges are sweeping the asset and wealth management industry against a backdrop of social, economic and geopolitical disruption. The choice is simple — adapt to the new context or fail,” says Olwyn Alexander, global asset and wealth management leader, PwC Ireland, in a prepared statement.
“Firms that effectively leverage technology such as generative A.I. and robo-advisors, build meaningful inroads to new and existing customers, diversify their recruitment, and deliver exceptional client experiences will be well-positioned to not only survive but thrive,” Alexander says.
More findings from the survey point toward consolidation:
- “Global assets under management fell to US $115.1 trillion in 2022 — nearly 10 percent below the 2021 high (US $127.5 trillion) — representing the greatest decline in a decade;”
- PwC says AUM will “rebound by 2027, reaching US $147.3 trillion — representing a compound annual growth rate of 5 percent;”
- “The survey finds that inflation, market volatility, and interest rate movements are by far the biggest concerns for both investors and asset managers over the next 12 to 24 months;”
- “More than 90 percent of asset managers are already using disruptive tech like A.I., big data, blockchain;”
- “Assets managed by robo-advisers will reach US $5.9 trillion by 2027, more than double the figure of US $2.5 trillion in 2022;” and
- “Firms are also turning to technology to transform, with more than 90 percent of asset managers already using disruptive technological tools (including big data, A.I., and blockchain) to enhance investment performance.”
The sum of these conditions is consolidation, according to the survey.
“A direct consequence of these pressures — and the drive to deliver at scale amid cost and competitive pressures — is that by 2027, PwC expects the top ten largest asset managers to control around half of all mutual fund assets globally, up from 42.5 percent in 2020,” according to the survey results.
Another consequence is that “73 percent of asset managers are considering a strategic consolidation with another asset manager in the coming months in order to gain access to new segments, build market share and mitigate risks,” according to the survey.
All is not lost, though. It looks like the industry is in for a bumpy ride that might take it to greener pastures.
“The good news is that the AWM [asset and wealth management] industry has shown remarkable resilience in adapting to changing market conditions and evolving investor demands over the years,” according to PwC’s analysis.
“Indeed, as near-term pressures mount, we’re already seeing the emergence of a new breed of AWM organization: tech-enabled, customer-focused, and prepared to operate across a wide range of asset types, both within and outside traditional AWM. By 2027, we expect the industry will be transformed and—as a result—it will be imperative for leadership to adapt accordingly.”
The respondents for the international survey are “cross-sectional in terms of role, firm size, and tranche. … Respondents covered a broad spectrum of AUM size, with more than half boasting assets of over US $10 billion. Public and private pension funds together accounted for more than 60 percent of the institutional investor respondent base,” according to PwC officials.
More about the survey can be found here: https://pwc.to/3YujcJi
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