Presentation on theme: "Global Asset Management Trends and The Flow of Capital"— Presentation transcript:
1 Global Asset Management Trends and The Flow of Capital Nick Anderson, Head of BlackRock’s Middle East and Africa BusinessSeptember 2013For professional clients / qualified investors only
2 Global asset management trends Global AUM has remained flat over the past five yearsGlobal growth rates likely to remain slowETFs, SWFs and DC are growth channelsInvestor preferences are rapidly shifting…Hugely competitive market place. Winner takes (nearly) allOther major trends reshaping the asset management industry
3 Global AUM has remained flat over the past five years Global AUM 2012 stood at $62 Trillion, just above the pre-crisis level in ‘07Overall the total AUM been relatively flat (average <1% for the past 5 years)This is largely due to: suppressed economic growth, de-leveraging, de-risking, declining DB pensions, lower income returns in portfoliosRevenues just recovering to pre crisis levelGlobal Asset Management MarketRevenues also are just recovering to pre-crisis levels. The switch to lower cost index and fixed income products combined with fee pressures in some product areas, has held down industry revenue With compensation and regulatory costs rising, industry profitability is down 16% from the ‘07 high in 201212%Source: BCG Global Asset Management Market Sizing Database Note: AUM total represent assets sourced from each region across 42 markets, that are professionally managed for a fee, including captive assets of insurance groups and pension funds delegated to asset managers
4 Global growth rates likely to remain slow Organic growth in developed markets is expected to rise from 1% to 1-2% over the next few yearsThe smaller, less mature markets are set to continue their faster growth rates, at +7%Yet size still matters; 1% gain in market share in developed markets equates to $590bnGlobal Asset Management Market by RegionAUM%Organic Growth Rate89%Developed Countries+1%+1-2%11%Emerging Countries+12%+7%100%Global AUM+1.2%+1.5-2%North America$27.7tn (49%)Europe $17.4tn (30%)Asia (ex Japan)$3.3tn (6%)Japan & Aus.$5.8tn (10%)MEA $2tn (2%)Latin America $1.5tn (3%)Source: BCG Global Asset Management Market Sizing Database Note: AUM total represent assets sourced from each region across 42 markets, that are professionally managed for a fee, including captive assets of insurance groups and pension funds delegated to asset managers.
5 ETFs, SWFs and DC are growth channels ETFs are the main high growth channel at 12+%, SWFs at 6-8%, all other channels <4%Global AUM organic growth of 1.5% to 2.0% from ‘12-’14Mutual funds and pensions account for 70% of global AUM, but continuing subdued growthETFs are expected to continue growing at a double digit pace (12-14%) over the next 3-5 years driven by both continued adoption and the switch to passiveSWFs will benefit from continued demand for resourcesGlobal Asset Management Market by ChannelSource: McKinsey Global Asset Management Database for institutions. Strategic Insight for mutual funds and ETPs. Note: (1) for institutions and H 2012 for mutual funds and ETPs; (2) includes corporates, government entities and non-profit.
6 Investor preferences are rapidly shifting… Low yields, volatile equities are driving investors away from traditional asset allocation model in favour of a more specialized approach including; low vol, alts and outcome-oriented productsSignificant secular product shift from core equities, core fixed income and sectors to:Product TypeCumulative Flow $bn (09’12’)Avg Organic Growth (09’-12’)Active specialities ( EM, Global, HY, Distressed, CLO, Bank Loans$8813%Flexible, Multi Asset and Alts (outcome orientated)$7334%Passive/ ETFs$1,05114%Global Asset Management Market by StrategyActive core includes active-domestic, large-cap-equity, active-government bond, money-market, and traditional balanced; active specialities includes equity specialties (foreign, global, EM, and small- and mid-cap sectors) and fixed-income specialties (credit, EM global, HY, and convertibles); alternatives includes structured products, hedge funds, private equity, real estate, infrastructure, LDI and commodity; solutions includes absolute-return, target-date, global-asset-allocation, flexible, income, and volatility funds
7 Hugely competitive market place. Winner takes (nearly) all: The top-10 managers have captured ~70% or more of the flows in most product segments in institutional & retail marketsThese managers have identified the important trends, innovated successful new products, have consistent product performance and close coordination between manufacturing and distributionPassiveUnconstrainedOutcome OrientatedInstitutional dogfight for market shareTop quartile performanceConsistency relative to peers
8 Other major trends reshaping the asset management industry: Fee compression; move to passive and altsDeclining correlation of individual stocks and lower volatility increase potential for alpha generationGrowth of barbell strategiesWeb technology for retail investorsMerges and acquisitions