Cash and alternative portfolios of top global fund managers grew at the fastest rate in 2020, the latest Thinking Ahead Group (TAG) annual market report reveals.
Released last week, the TAG survey of the 500 largest asset managers in the world found overall exposure to alternatives and cash increased by 19.8 per cent and 18.4 per cent, respectively, during the 2020 calendar year.
Despite the relatively faster growth-rate of cash and alternatives, the much larger equities and fixed income portfolios of the global mega-managers also increased at a healthy clip last year, up a respective 17.6 per cent and 15.3 per cent during a record-breaking period.
Total assets under management of the 500 firms in the TAG survey hit almost US$120 trillion at the end of 2020, jumping 14.5 per cent over the 12-month period.
Based on a subset of almost half the managers surveyed (with records dating back to 2016), the study found an average asset allocation to equities of about 44 per cent followed by fixed income (36.1 per cent), cash a just over 7 per cent, alternatives at 6.4 per cent and a further 6.2 per cent to ‘other’ (a category including multi-manager funds, overlays etc).
As per recent trends, the TAG survey also found asset concentration increasing among the top 20 managers to 44 per cent (compared to 43 per cent last year) while mid-tier firms lost about 1 per cent market share during the period.
“Of the top 500 managers, 221 names which featured on the list a decade ago in 2011 ago are now absent in 2021, demonstrating a quickening pace of competition, consolidation and rebranding,” a TAG release says.
“Blackrock [US$8.7 trillion] has retained its position as the largest asset manager in the ranking, followed by Vanguard [US$7.2 trillion] holding its second place position for the seventh consecutive year.”
During the year the US-based Fidelity Investments grew to US$3.6 trillion, pushing the almost US$3.5 trillion State Street out of third place in the TAG rankings for the first time.
While index-leaning managers dominate the upper echelon, passive investments still only account for about a quarter of the overall market based on an analysis of more than 200 firms.
“Passive strategies were implemented for 26.0% of assets, increasing in the last five years from 22.8% in 2016,” the TAG report says.
But last year the sector saw a massive surge of demand for sustainable investing, the study says, with over 90 per cent of managers reporting either significant or moderate increase in interest among clients.
Roger Urwin, TAG co-founder, said in the statement: “We have witnessed unprecedented change within the investment industry – accelerated dramatically by the pandemic. In particular, sustainability is no longer just a luxury for some firms. Instead, during the pandemic, asset managers from all corners of the world have became even more aware of the interconnectedness of the financial system with society and the environment.”
Environmental, social and governance mandates increased 40 per cent last year, he said, with most of that growth in exchange-traded funds.
The majority of the top 500 managers are based in the US or Europe but TAG lists over 20 firms domiciled in Australia including the highest-ranked, the US$424 billion Macquarie, at 64 and Magellan (US$78 billion) at 199. NZ-founded real asset specialist, Morrison, counts as Australian in the TAG survey – ending the year as the 445th biggest in the world with over US$14 billion under management.
TAG is a collaborative research venture of 45 asset owners of fund managers, formed under the aegis of Willis Towers Watson in 2016.