“The year 2022 can be described as a disaster, a really difficult year for all investors, asset managers, and asset owners,” said Jessica Gao, director of Willis Towers Watson's Thinking Ahead Institute.
“In 2023 the market recovered. It bounced back. A lot of investors saw growth and recovery,” she said.
Gao also predicted that alternatives such as infrastructure, private equity, and real assets will continue to attract attention going into 2025.
The report also found that 73% of managers increased resources deployed to technology and big data and 55% to cybersecurity.
“Some of these large asset managers have been spending a lot of money developing into this area, specifically integrating the use of AI, and it's going to be something we see even more impact from in the years to come,” said Gao.
Among separate geographies, North America experienced the largest growth in AUM in 2023 with a 15% increase, followed closely by Europe (including the U.K.) with a 12.4% rise. Japan saw a slight decline, with AUM decreasing by 0.7%. Managers from the Rest of the World category saw a moderate increase in AUM of 3.2%.
Equity and fixed income remain the dominant asset classes, comprising 77.3% of total AUM (48.3% equity and 29.0% fixed income). However, this marks a slight decrease of 0.2% compared to 2022. Investments in passive strategies in 2023 accounted for 33.7% of the total, marking a 6.1% increase in their share of investments. Actively managed assets represent 66.3%, which is a 2.9% decrease from 2022.
“The move into passive is not a new trend. It's a continued phenomenon, connected with a fee squeeze, because investors are now even more conscious about how much they pay for their external management,” Gao said.
The largest growth in asset class was seen in alternatives, which increased by 22.4%. Cash holdings also grew substantially, by 15.2%.
U.S. equities averaged a positive return of 6.9%. The MSCI Emerging Markets and MSCI Asian (ex Japan) indexes lagged recovery, with average negative returns of -3.1% and -4.8% respectively in 2023.
Looking forward, Gao identified geopolitics as another key area for investors to be more focused on as we enter 2025. The last 18 months have seen an escalation in global issues, ranging from ongoing military conflicts in Ukraine and the Middle East, to trade tensions between the U.S. and China.
"Geopolitical risks, these are at the forefront of asset owners’ minds. Managers need to help their clients and themselves better manage risks arising from geopolitical tensions," said Gao.
ESG trends
Environmental, social and governance-related AUM increased by 15.5% in 2023, and the proportion of ESG investments within portfolios surged to 29.6%, marking the highest level in the past three years.
According to the report, the gradual acceptance of ESG factors as financially material has reached a point where most investors now view them as essential tools for generating long-term value. However, the next step is the shift toward sustainability, a broader term that prioritizes both financial and non-financial considerations with a long-term, inter-generational focus, the report said.
“Investment managers across the world all have different positions on ESG, on risk management, and how they actually manage different levels of demands for sustainability," said Gao.
Only 79 asset managers ranked in the report provided workforce diversity data, a huge drop from the 157 that provided such data in 2022. From those that provided data, an average of 24% of senior management positions were held by women, while making up 41% of the total workforce. Women and minority groups still had a “relatively low representation in senior management positions” according to the report, despite seeing a marginal increase since 2022.
“The industry has worked on diversity for many years. It has improved a lot, but a reason that it hasn’t come as far as it could, especially in the senior positions, is the retention (of diverse employees) hasn't been great. That’s at least partly down to company policy and culture," Gao said.
“The imbalances (also) start at the level of graduate intake, so it may also be that a more holistic approach is needed going forward," Gao said.
Top managers
There was no change to the top five money managers, and all recorded an increase in AUM over 2022. BlackRock recorded more than $10 trillion in assets under management, a 10.9% increase in AUM year-on-year.
BlackRock has been the largest asset manager since 2009 when it acquired Barclays Global Investors; followed by Vanguard, in second since 2012, with $8.6 trillion AUM, a 12% yearly increase; and Fidelity Investments completing the top three for four consecutive years, showing a 13.6% increase to $4.6 trillion in AUM. State Street Global Advisors remained in fourth place, with a 10.4% rise in AUM to $4.1 trillion, and J.P. Morgan Asset Management in fifth, with an 11.5% increase in AUM to $3.4 trillion.
The biggest positive AUM jump in the top 500 was the U.S. firm Geode Capital Management, which showed a 24.4% rise to $1.2 trillion, and went from ranked 54 in 2022, to 23 in 2023. The passive manager had also jumped up 30 spots in the five years from 2017 to 2022.
The largest ranking gain in Europe belonged to Schroders, which jumped up eight places to 35 following a 9.6% rise in its AUM to $819 billion. In July, Schroders and insurer Phoenix Group launched a private markets manager.
