Global money managers running both passive and active strategies saw passive assets grow faster than active strategies in 2017, against the backdrop of demographic and technological changes set to revamp the money management industry.
Leading passive managers among that group offering both active and passive strategies grew 19.5% in 2017 to $19.89 trillion in assets under management, compared with the 15.6% AUM growth across the world's largest 500 money managers, the latest ranking by Pensions & Investments and the Willis Towers Watson Thinking Ahead Institute shows.
The research on the world's 500 largest money managers showed total assets grew to $93.8 trillion in the year ended Dec. 31.
Active strategies continued to dominate across the top 500 firms that offer both active and passive strategies, accounting for 77.6% of the total assets, or $72.8 trillion. However, active assets grew 16.9% from 2016, increasing at a slower pace compared to that group's passive assets, which grew 25% in the year.
The leading passive money managers' growth in 2017 compared with a 9.9% increase in 2016. Over the past 10 years, passive managers among the top 20 have seen their total assets grow at a compound annual growth rate of 9.5%. For the overall 500 firms, the 10-year annual growth in assets was 3.1%, according to Bob Collie, head of research at the Thinking Ahead Institute in London.
"There is no surprise there ... the extent to which (assets) have gone up was largely driven by the equity markets," Mr. Collie said. "There is a little bit more concentration in the biggest 20 managers as a proportion of the total. And there are more (assets) in passive. If you look at the year-on-year change these are not big, but when you look over 10 years both of these trends tend to be prolonged in that direction."
Mr. Collie thinks the statistics are "disguising the big story" as the industry is set to face more significant changes resulting from technology interacting with other global trends like demographics and the growth of investment platforms. "Effects (of the interaction) haven't been seen yet," he said.
"When you add them altogether, it seems to us the asset management industry is, at some point, poised for some sort of revamp," Mr. Collie said.
But "it doesn't flip overnight; it's not going to be like the taxi industry, which can change very quickly," he said. "Asset management can't change very quickly."