This year marks the 50th anniversary of Pensions & Investments collecting data from money managers, with a focus on institutional investing and, more specifically, U.S. institutional tax-exempt assets.
While a milestone for the P&I survey, this year's results painfully showed that many managers had little cause for celebration in 2022. Total assets under management at the 434 firms that participated dropped by more than $15 trillion in a single year.
U.S. institutional tax-exempt assets fell by $3.5 trillion in 2022 to $19.07 trillion, down 15.3%. In 1974, the 241 managers in the inaugural survey managed a combined $125 billion in U.S. institutional tax-exempt assets.
But it's more than the sheer size of the industry gains over the past 50 years (and how much can be lost in one down year); the ensuing decades have produced a complete reshaping of the names and strategies that dominate money management. The inaugural list is full of bank and trust companies, most of which haven't appeared in the pages of P&I for decades, at least under their original names. Consolidation and the rise of the megamanager has ushered in an industry where cost, scale, skill and breadth of strategies have created behemoths.
It wasn't until P&I's second year, in 1975, that Vanguard Group opened its doors. Blackstone Inc. came around in 1985 before BlackRock Inc. was spun out in 1988. Passive investing, the rise of alternatives, mega deals (such as BlackRock acquiring Barclays Global Investors in 2009) and the emergence of 401(k) retirement plans, among other major developments, have grown the industry exponentially but also created a tier of managers so large and dominant in certain markets that it's hard to believe they won't still be a force to contend with another 50 years from now. The majority of the 10 largest managers have significant passive investing businesses.
And predominantly active managers once again find themselves in an important stretch to prove their worth. Amid the continuation of COVID-19, rapidly rising interest rates and the highest inflation in 40 years, managers are now facing a predicted upcoming recession and what is sure to be a volatile 2024 U.S. presidential election. There could be considerable shakeout in the coming years.
On the bond side, as senior reporter Rob Kozlowski reported, investors and managers both have reasons to be excited about the asset class for the first time in years. Bond managers, or to be more specific, Los Angeles area-based bond managers, have proved to be the most resilient during P&I's 50 years of producing this data, with Pacific Investment Management Co., Trust Co. of the West (TCW Group) and Western Asset Management Co. (now an affiliate of Franklin Templeton) still around today. Los Angeles-based equity and bond manager Capital Guardian Trust Co. (Capital Group Cos.) also appeared on the initial list.
On a closing note, one of the other few remaining managers from the initial group is Putnam Advisory Cos., with $1.2 billion in U.S. institutional tax-exempt assets under management in 1974. Fifty years later, this will be Putnam Investments' last year as a stand-alone ranking after Franklin Templeton announced May 31 it was acquiring the Boston-based company. Putnam reported $133 billion in worldwide AUM, including nearly $30 billion in U.S. tax-exempt institutional assets.
