On the back of three very strong years of international economic and financial growth, professionally managed global assets under management ended 2007 at $54.7 trillion, a 4-year CAGR of 12%.
However, with greater uncertainty in global financial markets and a tougher economic outlook for the next couple of years, Cerulli Associates, a leading international asset management research firm, believes that global asset management growth is likely to moderate in 2008 and possibly 2009, before growth picks up again after 2010. Global assets under management are estimated to grow at a more modest 5-year CAGR of 7.9% to hit $80 trillion by 2012, with the emerging markets expected to grow considerably faster than the much larger developed asset management markets.
“There is a growing convergence taking place in the global asset management industry with the developed markets of the US and Western Europe growing more slowly and the developing markets of Asia-Pacific, Latin America, and Eastern Europe growing more quickly, and that process is expected to accelerate in the next couple of years,” says Shiv Taneja, managing director at Cerulli.
Cerulli believes the engine of asset growth for the foreseeable future is going to be the emerging markets. “But these markets come with their own set of problems, including the fact that increasingly many of these hitherto uncorrelated markets are increasingly moving to the same tune as the developed markets, especially in periods of extreme international volatility,” says Ken F. Yap, director, Cerulli.
And then there is the issue of size. Whilst the US asset management industry is expected to see the slowest regional growth to 2012, it is still the world’s largest and most sophisticated asset management marketplace, and likely to remain so for some time to come.
Cerulli’s prognosis suggests that despite the recent financial worries, the long-term trend for equity growth is intact and will account for the majority of global assets under management; indeed, the share of equities will rise from the current 53.3% at the end of 2007 to 56.4% at the end of 2012. This has to be good news for both investors, especially if you believe the argument that returns from equities are likely to be better than from most other asset classes; and for fund managers, whose profitability margins from equities are generally higher than from any asset class.