Retail investors will also generate 67% of revenues in the global asset management industry by 2030, up from 61% in 2021.
“With more money ‘staying home’ and in retail vehicles, deglobalization will accelerate,” the report noted.
Institutional investors, especially defined benefit pensions, no longer drive the growth of the asset management industry, the report noted. Indeed, fees generated from legacy institutional channels accounted for less than 22% of global industry revenues in 2021, and that figure is expected to fall to 18% in 2030.
In the U.S., this trend is especially pronounced, the report said. In 2000, legacy institutions represented more than 40% of U.S. fee revenues, but in 2021, the figure dropped to 25%, as individual/retail channels gained market share.
The report also found that China will become increasingly important as a source of investments. By 2030, the country will provide 45% of all net new investment flows for asset managers, versus 29% of the total from the U.S.
China will also represent 18% of total global AUM in the asset management industry by 2030, up from 11% in 2021. Meanwhile, the U.S. share will decline to 46% of AUM in 2030 from 52% of AUM in 2021, although the U.S. will still retain the top spot. Europe’s share, excluding U.K., will remain unchanged at 10%.
Significantly, China is “overwhelmingly dominated” by individual investors, the report said, meaning China and other emerging markets have no “institutional cohort” to compensate for the decline in U.S. and European defined benefit assets.
Daniel Celeghin, the New York-based managing partner of Indefi and co-author of the report, said in an interview that demographics will play a crucial role in these projected changes in the global asset management industry.
“In the mature markets, the U.S., U.K., Japan, we are seeing a decline in defined benefit pensions,” he said. “Part of that is due to the aging population. But what’s interesting is that in the emerging markets, most notably in China, we are seeing money moving into defined contribution, but overwhelmingly in retail investments not linked to any pension scheme.”
Mr. Celeghin added, “In the largest markets, regulators require local investment vehicles for most retail investors.” That’s partly due to familiarity with local companies and economies and the perceived higher risks that are inherent in international investing, he noted.
“But it’s a matter of policy also — regulators want capital to remain at home markets rather than sent overseas,” he said. “In China, for example, it’s very difficult for retail investors to send money to foreign markets.”
While institutional assets under management are not shrinking yet, their share of the global market will decline, as they are in a “stagnant pool,” he said. Asset managers that focus on institutional investors may eventually either consolidate, …….