Alternative assets, cost pressures and new technology are expected to take center stage in the asset management industry by the end of the decade, according to a new report.
While traditional active management is likely to continue to be "the core" of asset management, passive and alternative strategies are on track for faster growth, according to PwC' s new report, Asset Management 2020: A Brave New World. Alternative assets will grow by around 9.3 % a year between now and 2020, reaching $13 trillion, the report estimates.
And while asset management currently "operates within a relatively low-tech infrastructure," the report says, the industry is expected to prioritize technology for customer engagement, data mining (for information on clients and potential clients), operational efficiency and regulatory and tax reporting. Improving technology to combat cyber risk will also intensify, ranking as a top priority alongside efforts to mitigate operational, market and performance risk, PwC predicts.
Global assets under management will rise to roughly $102 trillion by 2020 from a 2012 total of $64 trillion, the report estimates, representing a compound annual growth rate of nearly 6%. North American assets are predicted to grow 5.1% annually to top $49 trillion by 2020, up from a 2012 total of $33.2 trillion.
In the U.S., asset managers face "the unique confluence of imminent mass retirement and growing healthcare costs," PwC finds, arguing that the combination "is likely to shift investment strategy toward longer-term wealth accumulation with more emphasis on fixed income and income-generating assets."
Nonetheless, it expects asset managers to focus increasingly on South America, Asia, Africa and the Middle East, where economies are set to grow faster than those in the developed world over the next six years.
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