Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
May 28, 2018 01:00 AM

Veteran managers boost assets 75% over decade

Growth illustrates how size keeps fees in line and attracts business

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Carlos Alejandro
    Frances M. Kinniry said Vanguard's growth was never part of a deliberate plan; the focus was always on investors.

    Worldwide assets under management by veteran investment firms rose 75.1% to $39.758 trillion in the 10 years ended Dec. 31, based on data collected for Pensions & Investments' annual money manager survey.

    Over the decade, which encompassed a deep market downturn after the 2008 financial crisis followed by a record U.S. equity bull market, large money managers experienced average growth of worldwide AUM of 71.6% and median growth of 43.6%, an analysis of P&I data showed.

    Aggregate worldwide assets of the 10 largest money management firms within this veteran universe totaled $26.1 trillion as of Dec. 31, up 110% from Dec. 31, 2007, and the assets managed by those firms accounted for 65.6% of total universe assets. (The group was composed of 29 managers that responded to P&I's survey with at least $250 billion in worldwide assets as of Dec. 31, 2007, and were still in operation as of Dec. 31, 2017. Included in each manager's total were net assets gained through acquisitions of at least 51% ownership in other money managers as well as net investment gains and net asset flows.)

    Observers predicted the next decade would be more challenging for money managers, particularly regarding the degree to which performance impacts net inflows.

    "In the past, there was always a question of which was more important for asset growth — performance or distribution," said Sean A. McKee, national practice leader-public investment management, KPMG LLP, New York. He added that going forward, "without stellar performance, you likely will not hold onto assets just because you have good distribution."

    In the 10 years ended Dec. 31., BlackRock Inc. topped P&I's veteran universe ranking with $6.288 trillion in worldwide AUM, up 364%. Following was Vanguard Group Inc., with asset growth of 262% to $4.94 trillion over the same period.

    Both firms also experienced high growth in U.S. institutional tax-exempt assets during that time frame: BlackRock's assets increased 572% to $1.545 trillion, while Vanguard's AUM rose 264% to $1.373 trillion.

    Not surprised

    Sources were not surprised by the dominance of the two firms. "BlackRock and Vanguard lead the charge in the money management industry. Both have large passive businesses which helps grow their asset bases. Big and trusted remains big and trusted," said Mr. McKee.

    The other firms occupying the top five spots in P&I's ranking based on worldwide AUM were State Street Global Advisors with $2.782 trillion, up 40.6%; Fidelity Investments, $2.449 trillion, up 31.5%; and BNY Mellon Investment Management, $1.893 trillion, up 68.8%.

    Growth of worldwide assets over the decade was overwhelmingly organic — net inflows and investment performance — on a manager-by-manager basis, with median growth of 96.7% and average growth of 68.7%.

    Some notable exceptions include New York-based BlackRock, which got 45.5% of its growth from 10 acquisitions over the 10 years; Franklin Templeton Investments, which achieved 58.7% of its $760 billion in assets through two deals; and Goldman Sachs Asset Management, which attributed 41.3% of its net growth to $1.494 trillion to nine acquisitions and two divestitures.

    Largest deal

    BlackRock struck the largest deal of the decade with the 2009 purchase of most of Barclays Global Investors NA, which added $2.078 trillion to the firm's AUM.

    BlackRock's acquisition of BGI was transformational, sources said, because the deal not only added assets under management but also brought in new investment capabilities that fueled the firm's growth, including passive and quantitative investment expertise, exchange-traded funds and customized target-date funds.

    BlackRock has been "the best acquirer," said investment banker Elizabeth Bloomer Nesvold, founder and managing partner of Silver Lane Advisors LLC, New York. "BlackRock only does a few deals but they do them very well. The deals generally are impactful and the AUM is meaningful at the time of the deal or later through growth from cross-pollination across the firm," Ms. Nesvold said.

    When asked for comment about BlackRock's growth over the 10 years ended Dec. 31, company spokesman Edward Sweeney said in an email: "Our long-term strategy has been to create a diverse and integrated global investment and technology platform, one that serves clients in all market environments."

    By contrast, Vanguard's growth of 262% was entirely organic.

    Other managers in P&I's veteran universe that relied entirely on net returns and net inflows for growth included BNY Investment Management, with asset growth of 68.8% to $1.893 trillion; Wellington Management Group LLP, with $1.08 trillion, up 83.6% in the decade; and T. Rowe Price Group Inc., which grew 147.8% to $991 billion.

    Prudential Financial saw growth of 115.2% to $1.394 trillion, 99.6% of which came from net performance and inflows.

    The spectacular growth of Malvern, Pa.-based Vanguard's worldwide assets over the past decade was not the result of a deliberate plan, said Frances M. Kinniry, principal and head of portfolio construction in the Vanguard investment strategy group. "The growth of assets under management and cash flow have never been anything we focus on as a strategic priority," he said. "We focus on our mission — to give investors the best chance of retaining their assets at their chosen risk level."

    By way of fulfilling that mission, Vanguard consistently keeps investment costs as low as possible, Mr. Kinniry said, adding that "since inception, Vanguard has been a leader on establishing the intersection of investment talent and costs."

    The issue of investment cost — part of the perennial debate over passive vs. active management — has deeply affected active managers over the decade, sources said.

    "Investment flows are pointing to the obvious conclusion that if you're not a manager in the cheapest quintile, you must have very good performance to survive," said Michael Falk, partner, Focus Consulting Group LLC, Long Grove, Ill., an adviser to money managers.

    KPMG's Mr. McKee agreed, stressing "active managers need to beat their benchmarks to stay in business. Investors are getting tougher about active managers which consistently lag their benchmarks vs. those who are beating the average of the market."

    Active management specialist Legg Mason Inc., Baltimore, saw a 22.8% drop in assets to $767 billion in the 10-year period with declines in all investment categories it ran in 2007 — equity, fixed income and money market funds — said company spokeswoman Mary Athridge.

    "We understand that both investor needs and return expectations have changed and we've been trying to pivot to new investment strategies and new vehicles," she said, pointing to changes in fixed-income strategies, which have grown 17.2% in the five years ended Dec. 31 to $420 billion; 10 years ago, fixed-income totaled $14 billion. Legg Mason also rolled out non-traditional, opportunistic and absolute-return strategies over the last decade.

    Scale is key

    Going forward, scale will be essential, KPMG's Mr. McKee said. Managers seeing 30% to 40% growth over the last 10 years "probably will survive" but will experience problems if they start losing assets.

    For money managers to thrive over the next 10 years, "transformational" deals akin to BlackRock's BGI acquisition will be important for firms that "want to climb the list," Silver Lane's Ms. Nesvold said.

    "Invariably, financial markets will experience enough pressure to break," signaling the end of the current bull market, Ms. Nesvold said. The ensuing environment of poor performance might be protracted, creating opportunities for "bigger entities which currently are biding their time to pick up capabilities they need to complete their investment lineups" from those money managers that struggle.

    10-year growth of the largest money managers
    Ranked by worldwide assets under management as of Dec. 31, 2017. All dollar amounts are in millions.
    RankManager Total worldwide assetsChange from 12/31/2007Net growth from acquisition/

    divestment, 2007-2017

    Net growth from investments/

    flows, 2007-2017

    1BlackRock $6,288,195 363.5%45.5%54.5%
    2Vanguard Group $4,940,350 262.0%0.0%100.0%
    3State Street Global Advisors$2,781,693 40.6%-79.1%179.1%
    4Fidelity Investments$2,448,807 31.5%1.1%98.9%
    5BNY Mellon Investment Mgmt.$1,892,941 68.8%0.0%100.0%
    6Capital Group$1,778,134 39.0%-80.9%180.9%
    7J.P. Morgan Asset Mgmt.$1,714,230 43.6%39.5%60.5%
    8Goldman Sachs Asset Mgmt.$1,494,000 75.1%41.3%58.7%
    9Prudential Financial$1,393,928 115.2%0.4%99.6%
    10PIMCO$1,335,250 78.9%2.9%97.1%
    11Wellington Mgmt. Group$1,080,307 83.6%0.0%100.0%
    12T. Rowe Price Group$991,100 147.8%0.0%100.0%
    13Nuveen/TIAA$970,459 122.9%23.2%76.8%
    14Northern Trust Asset Mgmt.$961,388 27.0%1.6%98.4%
    15Invesco$937,598 87.5%13.8%86.2%
    16Morgan Stanley Inv. Mgmt.$935,501 42.9%-40.6%140.6%
    17DWS Group$842,758 3.3%5.3%-105.3%
    18UBS Global Asset Mgmt.$796,310 1.3%6.9%93.1%
    19Legg Mason $767,241 -22.8%27.5%72.5%
    20Franklin Templeton Inv.$759,766 18.0%58.7%41.3%
    21Manulife/John Hancock$756,477 197.5%16.8%83.2%
    22MetLife Inc.$624,995 11.9%15.1%84.9%
    23Schroders$589,470 112.8%2.2%97.8%
    24AllianceBernstein $554,491 -30.7%-44.5%-55.5%
    25Wells Fargo Asset Mgmt.$491,759 79.0%0.0%100.0%
    26Nomura Asset Mgmt. Co. $473,480 84.3%0.4%99.6%
    27Federated Investors $397,570 33.9%48.1%-148.1%
    28Credit Suisse Asset Mgmt. $394,658 -35.7%0.0%-100.0%
    29MassMutual Financial Group$365,512 -7.2%3.3%96.7%
    Total$39,758,368 75.1%
    Average71.6%3.7%68.7%
    Median43.6%2.2%96.7%
    Universe includes firms that managed at least $250 billion in worldwide assets as of Dec. 31, 2007, and that were still in existence as of Dec. 31, 2017.
    Source: Pensions & Investments analysis of company data

    Related Articles
    Vanguard growth could raise it to No. 1 in 4 years
    More managers sign on to $1 trillion club
    Good returns, strong fundraising benefit alternative firms
    Vanguard growth could raise it to No. 1 in 4 years
    More managers sign on to $1 trillion club
    Institutional investors pull $2.8 billion from traditional managers in Q1 – eVe…
    Active management not going away, traders say in TABB Group report
    Recommended for You
    Thomas F.X. Powers and T. William Roberts III
    GW&K Investment Management promotes 2 to co-CEO
    Abortion rights demonstrators gather outside the US Supreme Court after a deeply divided Supreme Court overturned the 1973 Roe v. Wade decision and wiped out the constitutional right to abortion.
    Asset managers say they'll pay for travel after Supreme Court abortion ruling
    J.P. Morgan Asset Management names senior investment specialist
    An Active Approach to US Mid-Cap Equities for DC Plans
    Sponsored Content: An Active Approach to US Mid-Cap Equities for DC Plans

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit