The big keep getting bigger.
Total worldwide assets under management of large money managers rose 114% in the 10 years ended Dec. 31, while total assets of the smallest firms dropped 40% during the same period, an analysis of data from Pensions & Investments' annual money manager surveys show.
(For this analysis, large was defined as $100 billion or more in total AUM; small was defined as firms with $2 billion total AUM or less.)
Plus, the 100 largest firms as a group have grown faster than the top 500 for each year from 1996 through 2014 — with the exception of 2002. The number of smaller managers also dropped, to 160 firms at year-end 2014, from 236 at year-end 2009 and 282 at year-end 2004.
“There are a number of factors driving the increased concentration among the largest firms,” said Jeffrey Levi, a partner at Darien, Conn.-based money management consultant Casey, Quirk & Associates LLC.
Mr. Levi cited such factors as the shift in investor appetite to passive from active management, increased M&A activity and, quite simply, “an oversupply of managers.”
Executives interviewed agreed the biggest firms are gaining market share because asset owners are entrusting their money to managers with the largest breadth of capabilities.
“A lot of business is going to firms that have full-service capabilities across the board, because some investors want to have relationships across multiple strategies,” Andrew Komaroff, chief operating officer of Neuberger Berman Group LLC, New York, said in a phone interview.
Mark McCombe, New York-based senior managing director and global head of BlackRock Inc.'s institutional client business, shared a similar sentiment. “In a world where investing is more challenged from a stubbornly low-yield environment, it's becoming more important to deepen your investment capabilities,” he said.