Largest managers' AUM drops 13.7% in worst year since 2008

Assets under management at the 500 largest money managers dropped 13.7% over the year ended Dec. 31 to $113.72 trillion, while assets of the top 20 managers fell by a larger proportion, the latest research by the Thinking Ahead Institute and Pensions & Investments shows.

The joint study of the world's largest money managers showed the top 20 managers saw assets fall by 15.5% to $50.27 trillion. U.S. managers made up the biggest cohort of firms by AUM, accounting for 80.1% of assets, with the remainder run by European managers in the top 20. U.S. AUM among the top 20 managers was down 17.4% for the year while European manager AUM fell 6.9%.

"Overall, it was a challenging year for asset managers," said Jessica Gao, director of Willis Towers Watson's Thinking Ahead Institute. The fall in assets under management represented "the largest drop since 2008, but (was) still a less dramatic correction than the record -23.1% in 2008."

Among the top 500, managers based across all regions saw a decrease in AUM. European managers, including those based in the U.K., recorded a 16.8% fall over the year to $30.13 trillion, while North American managers lost 14.2%, managing $67.65 trillion as of Dec. 31. Japan-based managers saw their AUM decline to $5.79 trillion, down 5.5%, and managers from the rest of the world category lost 3.6% in 2022, with their collective AUM dropping to $10.14 trillion.

While traditional equity and fixed-income strategies continued to account for the biggest proportion of assets under management, at 45.1% and 32.3%, respectively, those asset classes also saw the biggest decreases in AUM — and fell by 2.4 percentage points in terms of overall allocation. Equity AUM, which includes real estate investment trusts, dropped 19.6% in 2022 to $28.55 trillion, while fixed-income AUM fell 14.5% to $20.46 trillion. Alternatives AUM accounted for 7.1% of total AUM at $4.49 trillion, representing a 7.2% fall over the year, and other assets — including infrastructure, multiasset funds, currency and derivatives — fell by 6.5% to $4.84 trillion. Other assets accounted for 7.6% of the total. Cash AUM fared better than other assets, ending the year at $5.02 trillion, or 7.9% of assets — down just 1.3%. AUM data relates to the 191 asset managers that have provided relevant data each year since 2018.

The MSCI All-Country World index was down 18.4% in 2022, following a gain of 18.5% in 2021. The Bloomberg U.S. Aggregate Total Return index returned -13% in 2022, following a -1.5% return in 2021.

The "sharp fall in equity and bond markets" meant managers with a heavier weighting to these asset classes suffered more in 2022, Gao said. Some of the largest managers in the top 20 were in this category, she added.

Passive investment continued to grow its share of total AUM, accounting for 34.7% of assets — up 1.4 percentage points over the year. However, the value of passive AUM fell by 13.7% over the year to $9.99 trillion. Active AUM fell further, however, by 19% to $18.83 trillion as of Dec. 31. Data is based on a subset of 189 managers that reported the relevant information every year since 2018.

The increased investment in passively managed funds is expected to continue, Gao said. "Some of these large index-based funds are attracting inflows, as being able to benefit more in terms of scale, technology and efficiency," she said. With investors continuing to search for low-cost solutions, "the trend is likely to continue."

Environmental, social and governance-related AUM did not escape the downward trend among the largest asset managers, either. The amount allocated to ESG principles decreased by 13.4% in 2022 to $10.69 trillion. However, despite the decrease in dollar amount, the proportion of AUM run in line with ESG principles surged to 26.4% — the highest level across the last three years. The amount invested in ESG principles increased in 2021 by 21.8%.

Similarly, while the dollar amount allocated to ESG mandates also fell, by 3.9% to $2.06 trillion, the proportion of total investments also grew to the highest level across the last three years, to 6.3%. The amount invested in ESG mandates increased by 49.2% in 2021.

"Sustainability stays high on the agenda and investors are striving to stay aligned with their net-zero commitments," Gao said.

Some managers also provided information on the diversity of their workforce. Among the 157 managers that provided data — down from 164 the previous year — women and minority groups still had "a relatively low representation in senior management positions, despite seeing a marginal increase since 2021," the study said.

The average female representation was 38% as of Dec. 31, down from 39% last year, while minority groups represented 22% of the total workforce in 2022, up from 21%. Among senior management, average female representation was 24% and minority representation was 15% as of Dec. 31, vs. 21% and 11%, respectively, in 2021. Among investment teams, female representation was 19% in 2022 — up from 16% the previous year; and minority groups represented 18% of the investment-related workforce, up from 15% in 2021.

There was no change to the top five money managers, although all five recorded a drop in AUM.

BlackRock retained its crown with $8.59 trillion in AUM, down 14.2% over the year. Vanguard was second, with $7.25 trillion, down 14.4%, and Fidelity Investments followed with $3.66 trillion, a 13.5% fall in AUM. State Street Global Advisors retained fourth place, although its AUM was down 15.9% to $3.48 trillion, and J.P. Morgan Asset Management rounded out the top five with $2.77 trillion, a 10.9% fall for the year.

There was movement in the rest of the top 20, with the biggest change from Franklin Templeton, which jumped to 14th place from 17th with $1.39 trillion in assets under management. Natixis Investment Managers was a new entrant in the top 20, coming in at 20th place with $1.15 trillion in assets under management.

Over the past five years, Fidelity International saw the biggest jump in the rankings, rising to 40 from 142 over that time period, with AUM of $663.1 billion. Fidelity International's compound annual growth rate of 43.7% over the past five years vastly outpaced the second-fastest growing firm, Brookfield Asset Management, with a 22.8% CAGR. Brookfield leaped 37 spots in the past five years to the 34th largest manager, with $790 billion in AUM. Passive manager Geode Capital Management jumped 30 spots in the last five years, to finish 2022 at 30th with $866.4 billion in AUM.