Global assets under management are expected to rise to approximately $102 trillion by 2020, with nearly 50 percent of them in North America, according to a new report by PricewaterhouseCoopers.
PwC’s new report, "Asset Management 2020: A brave new world," estimates that global assets under management will increase to roughly $102 trillion by 2020 from a 2012 total of $64 trillion, a compound annual growth rate of nearly 6 percent. The projected expansion fits in with PwC’s recently released "Global CEO Survey," in which the growth projections of asset management CEOs eclipsed CEOs from numerous other sectors.
AuM in North America is predicted to grow at a CAGR of 5.1 percent to reach over $49 trillion by 2020 from a 2012 total of $33.2 trillion, exceeding the expected AuM for Europe, Asia Pacific, Middle East and Africa combined.
“Amid unprecedented economic turmoil and regulatory change, most asset managers have not had time to bring the future into focus,” said PwC global asset management leader Barry Benjamin in a statement. “However, as 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 than ever to manage these assets to the best of their collective ability.”
According to the report, the asset management environment is being reshaped by several significant global megatrends including demographic changes, accelerating urbanization, technological breakthroughs and shifts in economic power. At the client level, PwC predicts that the global growth in assets will be driven by three key factors: the increasing use of defined contribution plans partly driven by a government-incentivized or government-mandated shift to individual retirement plans; the increase of mass affluent and high-net-worth-individuals in the SAAAME (South America, Asia, Africa, Middle East) regions where economies are set to grow faster than those in the developed world in the years leading up to 2020; and the expansion and emergence of new sovereign wealth funds with diverse agendas and investment goals.
In 2012, the asset management industry managed 36.5 percent of assets held by pension funds, sovereign wealth funds, insurance companies, mass affluent and high-net-worth-individuals. If the industry is successful in penetrating these clients assets further, PwC believes the share of managed assets can increase by 10 percent to a level of 46.5 percent, which would represent $130 trillion in global AuM.
PwC estimates that by 2020, pension fund assets in North America will rise by 5.7 percent a year to comprise slightly over $30 trillion (from $19.3 trillion in 2012) of the $56.5 trillion in total global assets. Overall, assets held by those in the mass affluent category (with wealth between $100,000 and $1 million) and high net worth individual investors (with wealth of $1 million or more) are expected to rise to more than $100 trillion and $76 trillion, respectively by 2020, compared to $59 trillion and $52 trillion, respectively, in 2012.
The size of sovereign wealth funds is rising fast and their presence in international capital markets is becoming more prominent. AuM for sovereign wealth funds is currently above $5 trillion, and PwC predicts this figure will surge to nearly $9 trillion by 2020.