Assets under management (AUM) at the world’s 500 largest asset managers have reached a new record of US$119.5 trillion, according to a new study. This figure, as of the end of 2020, represents a 14.5% increase from US$104.4 trillion in the previous year.

The research, conducted by the Thinking Ahead Institute in cooperation with US investment newspaper Pensions & Investments, confirms growing concentration among the top 20 managers whose market share increased during the period to 44% of total assets.

Of the top 500 managers, 221 names which featured on the list a decade ago in 2011 are now absent in 2021, demonstrating a quickening pace of competition, consolidation and rebranding.

BlackRock has retained its position as the largest asset manager in the ranking, followed by Vanguard holding its second-place position for the seventh consecutive year. Of the top 20, 14 are US managers, accounting for 78.6% of the top 20 AUM. On the whole, passive investments represent 26%, an increase of 16.2% compared to a 15.4% growth in actively managed AUM.

Asset managers have also been addressing the growing demand from more sophisticated asset owners, for more complex and tailored investment solutions. Outsourced chief investment officer (CIO), total portfolio approach (TPA) and exchange-traded funds (ETFs) have all been popular sources of growth for the world’s top managers, to meet clients’ increasing requirements for returns.

Roger Urwin, co-founder of the Thinking Ahead Institute, comments: “We have witnessed unprecedented change within the investment industry – accelerated dramatically by the pandemic. In particular, sustainability is no longer just a luxury for some firms. Instead, during the pandemic, asset managers from all corners of the world have become even more aware of the interconnectedness of the financial system with society and the environment.”

Passively managed AUM among the largest firms grew to a total of US$8.3 trillion in 2020, up from US$4.8 trillion in 2016.

“Asset managers have always had the ambition to develop and innovate. We have seen this particularly with ESG mandates, which increased by 40% in 2020. The biggest contributor to this was the growth in ESG ETFs,” Urwin adds.

Jayne Bok, head of investments, Asia, at Willis Towers Watson, says: “Asia’s asset managers experienced a slowdown in their growth over 2020, compared to previous years where Japan and China led the charge among their global peers. If asset managers in Asia want to continue the meteoric rise they’ve seen in the past, they will need to create greater diversity and resilience in their business models as well as within their portfolios. A change of mindset needs to happen within the Asian asset management industry in order to execute on net zero mandates and adhere to upcoming regulatory measures. The inclusion of ESG practices into their investments will be critical to the future resilience of their portfolios and will determine whether or not they will outperform their global peers in years to come.”

Other findings:

• Half of managers surveyed (50%) increased the proportion of minorities and women in top positions, over the course of last year.

• Client interest in sustainable investing increased across 91% of the firms surveyed.

• 78% of managers increased resources deployed to technology and big data and 66% increased resources deployed to cyber security.

• The number of product offerings increased for more than two-thirds (70%) of surveyed firms.

• Aggregate investment management fee levels decreased for a quarter (25%) of the surveyed managers – but fee levels increased for 21% of managers.

• A majority of managers (59%) experienced an increase in the level of regulatory oversight.