Global AUM falls in 2015; passive flows beat active
Despite net inflows into investment strategies, negative market performance last year resulted in a drop in global assets under management, revenue and operating margins for the first time since the financial crisis of 2008-2009, according to new research.
Meanwhile, net flows into passively managed investments totalled $747 billion in 2015, more than double the $312 billion of net money that went into active strategies.
Global assets under management fell 2.4% to $65 trillion last year from $67 trillion in 2014, $58 trillion in 2013 and $52 trillion in 2012, according to preliminary data from Casey Quirk, an investment industry consultant. Revenue slid 2.9% to $309 billion from $319 billion in 2014. Median operating margins fell back to 32% in 2015, matching the median levels achieved in 2012 and 2013, but trailing the 34% generated in 2014.
Net flows globally in 2015 shrank to 1.6% from 2.6% in 2014 (see graph for net flows versus capital appreciation for the past five years). As discussed in a recent paper, Casey Quirk estimated that global asset management industry net flows would average 1.7% from 2015 through 2020, driven largely by individual investors.
Moreover, since 2009, when passive funds had an 11% share of the overall market, that segment has grown by almost 73%, and now represents 19% of the total global asset management market in 2015. Active strategies, which enjoyed an 89% market share in 2009, now represent 81% of the total, according to Casey Quirk.
“2015 is in fact emblematic of the ‘new normal’ we see emerging in the industry,” said Jeffrey Levi, partner at Casey Quirk. “Beyond a low-growth environment and fee pressure, investment management leaders are confronting a broad industry shift in which individual investors are the primary source of new revenue.
“Going forward, industry leaders will differentiate themselves through product development, brand, specialised client engagement and risk management,” he added.
Indeed, individual investors are driving the large moves to passively managed index funds and exchange-traded funds.
Region-wise, Asia Pacific, and notably China, will drive net new flows in the coming years, according to a Casey Quirk survey in 2014.