Growth for institutional money managers is being tied to the rise in number and size of sovereign wealth funds, providing a potential treasure trove of new assets to manage and changing how managers win new business.
The assets up for grabs from sovereign wealth funds are vast. According to a May report from PricewaterhouseCoopers LLC, New York, called “U.S. Asset Management: Strategic Imperatives for Asset Managers,” wealth fund assets have jumped 59% since 2007 to $5.184 trillion as of Dec. 31, citing data from the Sovereign Wealth Fund Institute.
Continued asset gains will present what the report called “massive growth prospects” for money managers. The PwC report said the increase in sovereign wealth funds was one of five macro trends in money management along with demographic change, social and behavioral changes, changes in technology and increasing interconnectivity of emerging markets.
There's more than just sovereign wealth funds in state-directed savings, noted Wayne Bowers, Northern Trust Global Investments' executive vice president and head of asset management for Europe, Middle East and Africa and Asia Pacific, and London-based chief investment officer for international markets. Examples include the £11.1 million ($16.8 million) National Employment Savings Trust, the U.K's national defined contribution plan; Australian superannuation funds; and Swedish and Norwegian government retirement funds, all of which provide opportunities for investment markets. “The assets in this segment are huge and continue to grow,” he said. NTGI had $758.94 billion in assets under management as of Dec. 31, including $52.56 billion for sovereign wealth funds, according to Pensions & Investments data.
But getting this business for money managers isn't easy. Rather than waiting for RFPs, SWFsrequire a more direct, individual approach “If you're a sovereign wealth fund, everybody and their brother are calling you,” said John Siciliano, PwC managing director, global asset management consulting practice, based in New York. “If you're not calling, you won't get the business.”