An estimated annual growth rate of 6.6% until the end of the decade will see global pension fund assets reach $57trn (€42trn), according to analysis by accountants PwC.
In a report entitled ‘Asset Management 2020: A Brave New World’, PwC said the asset management industry would grow to $101trn by the end of the decade.
It said, however, that the market share of assets for the management industry would not grow substantially.
The growth will be driven by an increase in overall assets from affluent clients and high net-worth individuals, coming from emerging and frontier economies.
Despite the majority of asset growth coming from retail areas, PwC highlighted pension fund assets as a major contributor, continuing growth seen since the turn of the century.
From the $33.9trn in assets seen in 2012, the move towards the $60trn mark will be helped by a 9.9% growth in Latin American retirement assets, over eight years, and 9.5% from Asia Pacific.
PwC predicted European assets would increase by 6.2% from 2012 to 2020 and that US assets would grow by 5.7%, but that both would still account for the majority of global assets, at $14trn and $30trn, respectively.
PwC said, despite some defined benefit (DB) scheme assets being frozen, it would continue to represent a critical amount.
“However,” the report said, ”the increase in investable assets mainly stems from defined contribution (DC) schemes created in countries of fast-growing GDP and prosperity. Pension funds will swell the total assets managed as both developed and developing countries attempt to bring more savers under the retirement umbrella.”
The company also predicts that mandates, stemming from institutional investors, would continue to grow, and at a greater pace to mutual funds.
Assets managed under mandates will hit $48trn by 2020 compared with $41trn in mutual funds, with the former growing by 5.7% over the eight years, compared with 5.4% for the latter.
The firm predicted that, out of the $48trn in mandated assets, a significant majority would remain in active management, accounting for $35trn.
Rob Mellor, who led the report’s publication, said the asset management industry had not yet focused on the future, but that shifts would begin to occur.
He said managers would be unable to take advantage of the growth in assets from pension funds and high net-worth individuals unless they showed their commitment to managing assets to the best of their ability.
“Strong branding and investor trust in 2020 will only be achieved by those firms that avoid making mistakes that attract the ire of investors, regulators and policymakers,” he said.
“Asset managers must deliver the clear message that they deliver a positive social impact to investors and policymakers. The efforts required to satisfy investors and policymakers cannot be left to others.”