Each of the 10 largest asset managers today has more worldwide assets under management than the entire universe when Pensions & Investments was founded 40 years ago.
The asset pool has ballooned nearly eightfold in that time: Assets under management worldwide in 1977 (the first year P&I had detailed data on the worldwide assets) totaled slightly more than $600 billion, while assets at year-end 2012 were more than $46 trillion.
Today, independent money management firms, some with trillions in AUM, dominate the top 10 money managers in P&I's ranking, where bank trust companies and insurers were the majority when P&I launched. The multiasset-class firms have some advantages in retaining talent and maintaining global enterprises, while smaller boutique firms with specialist approaches are also winning business.
Changes in the capital markets have fueled the growth of money managers. Banks in a post-financial crisis world are more constrained by capital requirements and other regulation. Stocks and bonds, while still the largest asset classes, are only two of the many options investors have to put money to work.
In P&I's first compilation of the top managers in 1974, which includes only U.S. institutional tax-exempt assets under internal management, six of the top 10 were trust banks and insurance companies.
First National City Bank, which ranked third with AUM of $7 billion as of Dec. 31, 1974, later became part of Citigroup and finally, when Citigroup got out of the business in 2005, became part of the asset management unit Legg Mason acquired when it transferred its brokerage unit to Citigroup. Legg Mason ranked 20th in the most recent P&I survey, with $648.8 billion in AUM in the year ended Dec. 31, 2012.
Also gone is Manufacturers Hanover Corp., which ranked sixth in the 1974 survey, with AUM of $5 billion. The banking company withdrew from the institutional money management business in 1988, selling its unit to Mitchell Hutchins Asset Management, a Paine Webber subsidiary.
Both the bank and Mitchell Hutchins no longer exist. Manufacturers Hanover was folded into oblivion itself after being purchased by Chemical Bank in 1992 while Mitchell Hutchins later became part of Swiss bank UBS, when it bough Paine Webber in 2000.
Another major player in 1974, fifth-ranked life insurer Metropolitan Life Insurance Co., sold its asset management business, State Street Research & Management, to BlackRock Inc. in 2004. But Metropolitan Life is getting back into the business, announcing a year ago that it was forming a new unit, MetLife Investment Management.