Investment Assets To Swell To $102 Trillion By 2020; Nearly half of those assets will reside in North America.

PwC: Investment Assets To Swell To $102 Trillion By 2020

by Mark MelinFebruary 11, 2014, 11:37 am

Global assets under management are expected to rise from $64 trillion to $102 trillion by 2020, growing at a 6% compounded annual rate, a new study predicts.  Nearly half of those assets will reside in North America.

The report, “Asset Management 2020: A brave new world,” published by Price Waterhouse Coopers (PwC), notes six disruptive “game changers” and trends that will result, offering asset managers new opportunity.

“The industry stands on the precipice of a number of fundamental shifts and the potential for significant volumes of assets, there is more responsibility on firms,” noted Barry Benjamin, global asset managementleader, PwC.  “Strong branding and investor trust in 2020 will only be achieved by those firms that place a premium on transparency, a concrete value proposition to customers, and a firm commitment to avoiding practices that could prompt concerns among investors, regulators and policymakers.”

PwC: The “Game changers”

Among the game changers:

Shifting demographics will propel asset management to emerge “from the shadows to the forefront,” the report noted.  This increased visibility will require asset managers to make “new investments in data, technology and talent may be needed to respond to heightened regulatory and competitive pressures.  These expenses could continue to burden profits, which, according to industry analysis, are still 15-20 percent below their pre-crisis levels.”

New distribution regions will be redrawn into four regional fund distribution blocks, according to the report:  North Asia, South Asia, Latin America and Europe.  These regional blocks are expected to develop regulatory and trade linkages with each other, “reshaping the way that asset managers view distribution channels. North American asset managers may need to evaluate their strategy to consider the impact of these linkages.”

Fee structures may change to align more with investor interests and promote enhanced transparency.  “In the US, asset managers are facing the unique confluence of imminent mass retirement and growing healthcare costs which is likely to shift investment strategy towards longer term wealth accumulation with more emphasis on fixed income and income generating assets.”

Alternatives will become more mainstream, ETFs proliferate while traditional active management should continue to be the core of the industry.  Traditional active management could grow at a less rapid pace than passive and alternative strategies. PwC estimates that “alternative assets will grow by some 9.3 percent a year between now and 2020, reaching $13 trillion.”

A technological revolution will revamp the asset management industry. “Today, asset management operates within a relatively low-tech infrastructure, but by 2020 technology may become mission critical to customer engagement, data mining for information on clients and potential clients, operational efficiency and regulatory and tax reporting,” the PwC report said.  “Moreover, cyber risk will intensify, ranking as a top priority alongside operational, market and performance risk.”

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PwC: Changing asset holder structure

Some of the additional trends the report noted were changes to the structure of asset holders. By 2020, the report notes, “pension fund assets in North America will rise by 5.7% a year to comprise slightly over $30 trillion (from $19.3 trillion in 2012) of the $56.5 trillion in total global assets.  And while Latin America is forecasted to realize nearly 10 percent year-over-year increases in new pension assets for Latin America and Asia Pacific, the largest pools of assets in 2020 are projected to remain concentrated in the US and Europe.”

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When evaluating the total assets under management in 2020 it is unclear how these values were impacted byinflation, currency devaluations or various sovereign debt crisis potential.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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