The share of assets managed by the 50 largest money managers in the ranking continued to grow in 2015, although these managers also saw the overall value of their AUM decline.
Continuing a trend of recent years, the top 20 managers took the lion's share of total assets, with 41.9% vs. 41.6% in 2014.
Assets reported by the 20 largest ranged from $4.6 trillion to $875 billion. Assets managed by these firms also decreased, although at a slower pace than for the top 500 overall, by 1% in the year, to total $32.1 trillion.
Of the top 20, U.S. managers held the bulk of assets, at 69%, up from 65.5% in 2015. The remaining assets were held by European managers in both years.
Managers in places 21 to 50, whose assets ranged from $870 billion down to $375 billion, grew their share to 23.2%, up from 22.9% a year previous. However, midsize managers — with assets ranging from $361 billion to $35 billion, and taking places 51 to 250 — saw their share of total assets fall to 29%, from 29.5% in 2014. The smallest managers in the ranking, places 251 to 500 and with assets between $35 billion and $7.8 billion, took the remaining 5.8% of the pie, compared with 6% in the 2014 ranking.
The continued barbell of money managers by size and asset slice is probably the result of a combination of factors, said Ms. Nikulina, including consolidation of money managers, and also the “significant move toward fiduciary management or outsourced CIO models, and in the (defined contribution) space toward platforms and master trusts. It means that, essentially, we have a little bit of consolidation happening driven by asset owners,” Ms. Nikulina said.
Another significant move in 2015 relates to the active vs. passive debate. The share of assets run by the top 500 managers in active strategies continued to be dominant and in fact grew over the year, at 78.3% vs. 77.8% in 2014. That follows a decline from 79.7% of assets run in active strategies in 2013.
And while assets reported in active and passive strategies totaled $24 trillion, down 3.4% vs. 2014, active strategies' share declined 2.8%, vs. a 5.5% drop in assets run in passive strategies.
“This is an interesting one. Considering the state of the market — when it becomes a bit choppier and more volatile — you would expect (investors) will have a bit more trust in active” management, said Ms. Nikulina. While the moves are not particularly big, she said it is “directionally quite interesting,” and also reflects the move toward fiduciary management and outsourced CIO models, “where governance is shifted — this also to a degree allows (investors) to use active strategies more.”
Another interesting directional move is in asset allocation. Investments in alternative asset classes increased 25.1% to total $1.8 trillion. Investment in equities totaled $20.2 trillion, down 5.5%; exposure to fixed-income fell 9.3% to $14.6 trillion; and allocations to other assets declined 3.2% to $6.9 trillion. Real estate allocations dropped 13.2% to $988 billion.
While the allocation to alternatives is small in asset terms, the move is still significant, said Ms. Nikulina. “We see it very clearly from what clients are doing, how money gets reallocated, and (by the) number of conversations we have dedicated to traditional asset classes vs. alternatives. I am not surprised, and thinking what asset owners are facing,” with volatile markets and low returns, investors are making their assets work harder.
It is also a continuation of a trend to diversify exposures, she said.
For 2016, Ms. Nikulina expects most of these trends to have continued. A number of consolidation deals have already taken place this year, which will possibly continue the trend of the top 20 managers growing their share of total assets. Markets have also continued to be volatile, although are in relatively better shape than 2015. The MSCI ACWI is up 4.9% for 2016 through Oct. 17, and the Russell 3000 index is up 5.98%. Bonds have returned 5.25% to that date, according to the BarCap Global Aggregate index. Market volatility, however, may support the trend toward active, said Ms. Nikulina.
“The runoff of DB, internalizing of asset management by larger schemes ... (those trends) are all still there,” she said.