In a rare backwards step, the world’s biggest 500 funds managers shed a collective US$18 trillion in 2022 as the asset pool receded by 13.7 per cent year-on-year, according to a just-released Thinking Ahead Institute (TAI) survey.
The top 500 global funds managed US$113.7 trillion between them as at the end of last year compared to US$131.7 trillion 12 months previously, the TAI report shows.
“Japan saw a 5.5% decrease, followed by North America with a 14.2% decrease, and Europe (incl the U.K.) experienced a 16.8% decrease,” the survey says. “Managers from the rest of the world category had a relatively more resilient year, with their AUM decreasing by 3.6%.”
The fund shrinkage was not surprising against the cross-asset class rout in 2022 that saw both equities and bonds savaged amid high inflation, rising interest rates and geopolitical tension, according to Jessica Gao, TAI director.
Gao said fund losses last year “effectively erased most of the gains achieved during the record-breaking 2021”.
“As we have conducted this research, a common theme throughout our conversations with managers has been to expect a higher-for-longer regime in interest rates in which concerns about inflation and growth remain elevated, suggesting investment managers are not out of the woods yet,” she said.
The TAI data also reveals minor respite for small-to-middling managers that carved out some market share from the top 20 fund behemoths in 2022.
While the big 20 still controlled 44.2 per cent of total assets under management (AUM) in the 500 fund universe as at the end of last year, the figure was down 1 per cent on the 2021 result.
“Conversely, managers ranked 21 to 50 saw their AUM share increase from 20.4% in 2021 to 20.6% in 2022. This marks the first increase since 2015,” the TAI report says.
“Similarly, managers ranked 51 to 250 and 251 to 500, saw their participation increase by 0.5% and 0.3% in 2022.”
BlackRock, Vanguard and Fidelity held their respective first, second and third ranks in the top 500 table with AUM of US$8.6 trillion, US$7.3 trillion and US$3.7 trillion in the 2022 report.
Meanwhile, the UK-based Fidelity International (not to be confused with the similarly named US entity) recorded the biggest year-on-year jump in AUM, growing almost 44 per cent in the 12-month period and rising from 142nd to 40th in the rankings.
The largest manager from the Australasian region, Macquarie, also leapt into the top 50 in 2022, rising to 48th place from 58th the previous year as AUM rose 8 per cent to reach almost US$543 billion.
No NZ-domiciled entities make the TAI top 500, although the Wellington-originated infrastructure specialist, Morrisons & Co, land at 402nd in the list with about US$18 billion under management – but attributed to Australia.
TAI found the passive creep trend continued over 2022, albeit that active management remains the most popular style among the 500 big funds.
“Investment in passive strategies now accounts for 34.7% of the total, marking a 4.0% increase in its share of investments, while actively managed assets represent 65.3%, experiencing a 2.0% decrease compared to the previous year,” the study says.
Gao said as well as the gathering financial risks, fund managers are also grappling with sustainability and other systemic challenges in a shift that requires “robust investment processes that are able to model and measure risks like never before”.
“Looking ahead, this awareness of system-level risks could offer support to the investment world as it grapples with the generational challenge of climate change impacts and other sustainability issues,” she said.
TAI was founded by global investment consultancy and insurance broking conglomerate, WTW (formerly known as Willis Towers Watson).