Despite the far-reaching effects of the COVID-19 health crisis, global assets under management (AuM) grew by 11% to reach $103 trillion in 2020, although operating profits did not follow suit—remaining stable at around 34% of net revenues as a result of cost pressure and fee contraction across all asset classes—according to a new report from Boston Consulting Group (BCG). The report, titled Global Asset Management 2021: The $100 Trillion Machine, is being released today.

This 19th annual BCG study of the global asset management industry reveals that global net inflows reached $2.8 trillionin 2020, or 3.1% of the total AuM at the beginning of the year—compared to a historical average of from 1% to 2% over the previous decade. Retail investors were the main drivers of AuM growth. The report also examines how new realities—for example, in markets and technology—will determine future industry leaders and why specific areas such as private markets, ESG investing, and advanced data and analytics are likely to play key roles. 

According to the report, retail AuM portfolios grew by 11% in 2020, representing 41% of global assets at $42 trillion. Institutional investments grew at a similar pace to reach $61 trillion, or 59% of the global market. North Americaretained its position as the world's largest asset management region, with AuM increasing by 12% to reach $49 trillion. Growth was strong across other regions as well, with Europe at 10%, Asia-Pacific at 11%, and the Middle East and Africaat 12%. 

"The asset management industry is coming out of the global crisis with significant changes, especially in distribution," said Lubasha Heredia, a BCG managing director and partner, and coauthor of the report. "These present challenges but also multiple opportunities for growth. The next big task for all industry players will be to carve out a suitable growth strategy as they refocus on the core areas of differentiation and advantage, which could be any combination of client engagement models, investment products, operating models, or talent strategy."

The report says that passive investments continued to lead in market share, increasing AuM by 17% globally during the year, bolstered by strong net inflows and market growth. This trend is expected to continue over the next five years, with growth forecast at 9% annually. Although AuM for traditional and specialized active assets also expanded—with core products such as large-cap equity funds and domestic government-based fixed-income funds up by 11% during the year, money market funds up by 12%, and specialized active products up by 9%—the report forecasts that these will be the slowest-growing product groups over the next few years.

The year 2020 saw strong performance once again from alternatives, with AuM growing by 11% for the year and capturing 40% of the industry's revenue despite representing only 15% of global AuM. The report takes a deep dive into private markets, in light of the opportunities for growth and transformation in the sector over the next few years. BCG sees potential for big wins in private markets, especially for firms that can successfully enter the retail market, systematically use data and analytics to enhance decision making, and integrate meaningful ESG metrics. 

The 2020 pandemic forced asset managers to accelerate transformation throughout their businesses, but nowhere has change been more of a priority than in the distribution function. 

"The next generation of distribution will combine advanced digital capabilities with the human touch," said Simon Bartletta, a BCG managing director and senior partner, and coauthor of the report. "The early achievements we are seeing that have been gained from asset managers investing in digital distribution are truly impressive."

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