World's largest asset managers' AUM surges to record $140 trillion, driven by North America and passives
News Summary
Total Assets Under Management (AUM) at the world's 500 largest asset managers reached USD 139.9 trillion by the end of 2024, a 9.4% increase from the previous year, surpassing the record set in 2021, according to research from WTW's Thinking Ahead Institute. This recovery was largely driven by North American managers, who saw a 13% year-on-year growth to USD 88.2 trillion, representing 63% of the total AUM among the top 500 firms. Japan, however, experienced a 9.5% decline in AUM, highlighting regional disparities. Strategically, the industry continues a significant shift towards passive investment strategies, which now account for 39.0% of total AUM, up 6.1%, while actively managed assets declined to 61%. The top 20 asset managers further consolidated their influence, controlling 47% of total AUM, with 15 U.S.-based firms dominating this segment. Private market specialists, such as Brookfield, demonstrated rapid AUM growth, achieving a 20% annualized increase over eight years. The Middle East is emerging as a strategic hub for asset managers due to regulatory reforms and thematic opportunities in Shariah-compliant investing, ESG, and digital assets. Artificial Intelligence adoption is in early stages, with 47% of firms investing in AI, but 78% allocating less than 10% of their tech budgets to it; however, 61% expect AI spending to grow, while 64% express concern about AI-related cyber risks.
Background
This report by WTW's Thinking Ahead Institute provides an annual snapshot of the global asset management industry's performance, with data current to the end of 2024. The significant recovery and record-high global AUM in 2024, following 2022's volatility, reflect the resilience of global financial markets and renewed investor confidence, particularly evident in North America. The report underscores ongoing structural shifts towards passive investment and private market strategies, trends that have been observed over several preceding years. Concurrently, the Middle East is increasingly positioning itself as a strategic hub for global capital, driven by proactive regulatory reforms and economic diversification efforts. Artificial intelligence, while an emerging technology, is gradually integrating into the asset management sector, yet its adoption remains in early exploratory stages, presenting both opportunities and potential risks.
In-Depth AI Insights
What are the implications of North America's continued dominance for global capital flows? The sustained high growth and dominance of AUM in North America, particularly the U.S., solidify its central role in the global financial system. This is driven not only by its robust economic size and innovation but potentially also by the Trump administration's relatively stable and pro-business policy environment. This concentration effect implies that global capital allocation will continue to heavily rely on U.S. market performance and policy signals. For non-U.S. investors, this means a continued need to closely monitor U.S. economic cycles and monetary policy, as they directly influence global liquidity and risk appetite. Conversely, Japan's declining AUM may signal long-term structural challenges in attracting international capital, including demographic shifts, slower economic growth potential, and inflation expectations. How do the ascensions of passive investing and private markets reshape institutional investors' asset allocation strategies? - The growth of passive investing reflects investor preference for low-cost, market-replicating strategies, exerting continuous pressure on fees and performance for traditional active funds. - The rapid expansion of private markets (e.g., private equity, private credit, infrastructure, real estate) indicates that institutional investors are actively seeking avenues for superior returns and diversification beyond public markets. These asset classes often offer higher potential returns and lower correlation but come with inherent risks of illiquidity and opaque valuations. - This dual trend compels institutional investors to rebalance portfolios, reducing reliance on traditionally actively managed public markets in favor of increased allocations to passive instruments and illiquid private assets, aiming to capture alpha in the current low-yield and volatile environment. What are the strategic considerations for asset management in AI adoption and the strategic positioning in the Middle East? - Initial AI investments and future growth expectations suggest asset managers recognize AI's long-term potential for operational efficiency, enhanced investment decision-making, and client service. However, low budget allocation and cyber risk concerns reflect the industry's cautious approach to AI integration and risk management. Firms that effectively leverage AI early could gain significant competitive advantages, while those that fail to adapt risk falling behind. - The rise of the Middle East as a new strategic hub is not merely due to its substantial sovereign wealth, but also its proactive regulatory reforms and openness to emerging thematic investments like digital assets and ESG. This presents new market entry and product innovation opportunities for global asset managers, especially as Western markets face geopolitical uncertainties and increasing regulatory scrutiny. Establishing a presence in the Middle East can help global asset managers diversify geographically and tap into the region's growing economic and investment demand.