The strengthening US currency pushed the collective assets of the world’s top 500 fund managers down 1.7 per cent year-on-year, according to the latest in the annual Willis Towers Watson (WTW) series.
As at end December 2015 total assets under management of the top 500 fund manager club stood at US$76.7 trillion compared to US$78.1 trillion 12 months previously, the WTW report shows.
However, in local currency terms the top 500 assets under management was up 2.5 per cent over the year while the top 20 manager subset gained 1.7 per cent during the same period.
“… the considerable appreciation in the value of the USD relative to most currencies during the year impacted the growth rates of the 300 non-US managers, thus dampening the perception of asset growth during the year,” the report says. “…This is particularly evident in Australia, Canada, the Eurozone, Japan and emerging markets such as Brazil, India and South Africa.”
Over the five years to December 31, 2015, only the Chinese Yuan (up 0.4 per cent) outpaced the US dollar while the Brazilian and South African currencies fell the most, both down about 15.5 per cent during the period.
US-domiciled managers control over 52 per cent of all assets in the top 500 list, up more than 10 per cent on the same statistic in 2005 (41.87 per cent), the WTW report shows, as those in Japan and many European countries shed market share.
The WTW study also notes that passive assets share of the total funds under management (FUM) fell slightly over the year from 22.2 per cent in 2014 to 21.7 per cent in the latest count. However, the split between active and passive management in the top 500 study has stood at roughly 80/20 for several years, the report says.
“Total assets managed by leading passive asset managers declined (in USD terms) for the first time since 2011, but to a lesser extent than the decline in Top 500 manager’s [FUM] of 1.7%,” the WTW study says.
Passive FUM dropped just 0.8 per cent during the annual period while the indexers market share has seen compound annual growth of 11.4 per cent over the 10 years to December 31, 2015, compared to 8.3 per cent for active assets in the top 500 list during the same decade-long stretch.
At the same time, larger managers have eked out a greater market share of the top 500 with the 50 biggest firms claiming 65.1 per cent of assets in the 2015 report versus 64.5 per cent 12 months previously.
“The representation of the largest 50 firms in the ranking has increased slowly over the past few years, mainly at the expense of more medium-sized firms,” the WTW study says. “This gives an indication that investors have been allocating capital to the largest managers, who manage a significant amount of passive and alternative indexation assets.”
Over the longer term the top 50 market share increased nearly 5 per cent from 60.4 per cent in December 2005 to 65.1 per cent in the most recent statistics.
According to the WTW report, the Dutch-based Aegon Group experienced the biggest jump up the rankings of the top 50 managers, climbing from 63rd to 25th over the year. Other names more familiar to NZ investors such as Dimensional Fund Advisors (up 25 spots to 49), Schroders Investment Management (rising 13 places to 43) and T Rowe Price (from 28 to 19) also reported strong gains during 2015.
In keeping with the general decline, most asset classes also dropped in the WTW US dollar-denominated metrics over the year with real estate (down 13.2 per cent) the worst while fixed income, equity and ‘other’ assets fell by 9.3 per cent, 5.5 per cent and 3.2 per cent respectively
“On the other hand, Alternatives had an increase of 25.1%,” the WTW study says.
Just under 60 per cent of all fund manager assets in the top 500 flowed from US sources during the year, the WTW report says, in keeping with historical results that have ranged from 57.4 per cent to 63.2 per cent..
“Assets received from Australia saw the greatest growth in 2015 with an increase of 8.6%,” WTW says.
While no NZ managers made the list – which bottomed out at US$7.75 billion – almost 20 Australian firms were among the WTW top 500, ranging from Macquarie at 52 (over US$355 billion) to the 464th ranked JCP Partners boasting about US$9.1 billion under management.
The top three largest managers – BlackRock, Vanguard and State Street – retained their places over the year, however, Fidelity swapped rankings with Allianz (which owns PIMCO) during the period to finish fourth and fifth respectively.