Top investment managers lose assets

01 November 2012   Category: News, Global   By Toby Garrod

Assets managed by the world’s largest 500 fund managers fell by around 3% to US$63 trillion in 2011, breaking a trend of the last two years which had seen assets rise by 16% and 4% in 2009 and 2010, respectively, according to the P&I / Towers Watson World 500. The research shows that due to the fall, assets are now below 2006 levels of US$64 trillion and the top 20 managers were the segment which lost the most assets in 2011, a decline of around 7%.

Mark Brugner, head of manager research Asia at Towers Watson Investment, says: “2011 was another volatile and unpredictable year for most asset managers with patchy performances depending on size, strategy and asset class. Developments in the second half of 2011 and into 2012 remind us that the weak underlying economic fundamentals have not changed much and risk appetites remain understandably subdued among institutional investors.”

The research reveals that, by number, bank-owned asset managers continue to dominate the top 20, although the number of independent managers in the group remained static. There are 11 US-based investment managers in the top 20 managing over 64% of these assets, while eight managers are European-based (33% of assets) and one is Japanese (3% of assets). Overall Japanese managers’ assets increased 6% in 2011, while European managers’ assets as well as US-based managers’ assets declined 7% and 1%, respectively.

“I think this has less to do with Japanese managers outperforming but more the fact that European managers have underperformed,” Mr. Brugner tells Asia Asset Management. “Looking at the change of total value of assets managed by managers in Europe, Japan, North America and ‘other’ countries in 2011, one can see that the assets of North America and ‘others’ remained relatively stable since end of 2010. The biggest move was European managers assets declining 7%, whereas Japan assets increased 6.4%.

“The fact that US based managers are the biggest has been consistent over the years,” says Mr. Brugner. “The only significant change is probably that Barclays is not among the top 20 anymore because of the sale of parts of the asset management businesses to the US firm BlackRock.

Craig Baker, global head of research, said: “The largest 20 asset management firms were the biggest losers in 2011 with their share of assets falling significantly and reversing a strong growth trend of the past two years. The pressure is back on asset managers as performance fees dry up in falling markets and clients demand concessions on fees as well as exploring lower cost options. Although managers that have learned the lessons of the last few years – those of tight overhead control, reducing product proliferation and better aligning fees – are more likely to have remained profitable.”

According to the research, asset managers from developing countries have more than doubled their share of total assets to around 5% during the past ten years. During the same period, assets managed by the top 20 managers have almost doubled to around US$25 trillion. The research shows how the distribution of assets has shifted in the past ten years, favouring US, Canadian and French managers which have grown share by 6%, 3% and 2% respectively; while Swiss, Japanese and UK managers have lost share by 6%, 3% and 2% during the same period.

Since 2001, passive assets managed by the largest managers have grown by over 12% annually compared to 5% annually for the top 500 managers as a whole, during the same period. In 2011 passive assets, managed by the largest managers, fell by over 1%, the third and smaller fall in passive assets since the research began.