Retirement fund assets will reach close to $57 trillion in 2020, serving as a major growth opportunity for global money managers, according to a report by PricewaterhouseCoopers.
With retirement assets having risen to $33.9 trillion in 2012 from $21.3 trillion in 2004, PwC predicts they will grow by 6.6% a year to reach $56.5 trillion by 2020, according to the report, “Asset Management 2020: A Brave New World.”
In addition, defined benefit schemes will persist for the balance of this half-century, and although the majority of them will be frozen, “they will continue to represent a critical mass of assets under management,” according to the report.
The increase in investible assets comes primarily from defined contribution plans being created in prosperous countries.
PwC predicts that DB plans by 2020 will represent a far smaller pool of assets, while DC plans will be the dominant model for retirement savings.
Retirement assets will swell as both developed and developing countries encourage people to save for retirement. Growth in new pension assets will be strongest in Latin America and the Asia-Pacific region, with growth rates reaching more than 9% each.
North America and Europe will still have the largest pools of assets in 2020; more than $30 trillion in North America and nearly $14 trillion in Europe.
In 2012, the money management industry managed 36.5% of assets held by pension funds, sovereign wealth funds, insurance companies, high-net-worth individuals and other retail investors. By 2020, PwC predicts the industry will manage $101.7 trillion of those clients' assets, implicitly assuming the penetration rate to remain constant. However, if the industry is successful in gathering more of these clients' assets, the report asserts that money managers will be able to increase their share of managed assets by 10% to a level of 46.5%, which would in turn represent $130 trillion in global AUM.