Only 56% of money managers with more than $10 billion in assets under management reported positive net flows in 2015, compared with 60% one year earlier and 63% in 2013, according to a new survey conducted by Casey Quirk by Deloitte and McLagan.
The 15th annual Performance Intelligence Asset Management Benchmarking Survey also found net flows into passive strategies globally doubled in the past two years to reach 72% of the total in 2015. Traditional active strategies suffered outflows in 2015 against gains in 2014. More net new money flowed to multiasset-class strategies — 24% of the total compared with 18% in 2014.
New investments into alternatives slowed to 8% of total net flows in 2015 from 10% in 2014.
Index-linked and multiasset class investment strategies attracted more than 90% of global net new money last year.
Negative returns from capital markets contributed to low growth overall. Global AUM barely rose to an estimated $69 trillion in 2015 from $68 trillion in 2014, according to the survey.
“Individual investors — increasingly skeptical of active management, fee sensitive and outcome oriented — are the drivers of industry growth,” said Jeffrey Levi, a principal at Casey Quirk by Deloitte, in a news release accompanying the survey. Through 2020, individual investors are projected to generate 90% of all new money invested, with 10% from institutions, according to the survey.
“Many traditional active managers must adapt because their business models are outdated in a world in which individual investors and their need for advice are the revenue generators,” Mr. Levi added. “Fees are under increasing scrutiny, and regulatory pressures are on the rise. This shifting marketplace will in turn drive greater convergence in the industry across wealth management, asset management, insurance and financial technology.”
Asset owners' buying preferences are increasingly diverging as the industry shifts from a product orientation to an advice orientation. Four buyer archetypes are emerging — outcome-oriented, cost-conscious, those influenced by gatekeepers, or those interested in investment quality. Each has a distinct set of preferences and behaviors.
The largest group, those who favor traditional or active investment quality now, account for roughly half of industry AUM, but are projected to shrink in the future. The other three groups will see the majority of growth. Winning asset management firms will need to reorient their business propositions, investment capabilities and distribution organizations around one or more of these buyer segments, according to the survey.
Survey participants comprised members of the U.S. Institute and European Institute — forums for senior leaders at investment management firms — and the executive teams of leading asset management firms.
The firms surveyed companies with AUM ranging from less than $5 billion to more than $1 trillion.
The study included more than 100 investment management firms headquartered in North America, Europe and Asia-Pacific, investing more than $20 trillion for institutions and individuals.