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Portfolio > Asset Managers

1 in 6 Asset, Wealth Managers Likely Gone by 2027: PwC

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What You Need to Know

  • A new PwC report says that 16% of asset managers will be gone or absorbed because of shifting investor expectations, technology and other factors.
  • The survey also found that 73% of asset managers are considering a strategic consolidation with another asset manager.
  • Nine in 10 asset managers reported that they already use disruptive technological tools to enhance investment performance.

Sixteen percent of asset and wealth managers globally are likely to be absorbed or cease to exist by 2027, according to the 2023 Global Asset & Wealth Management Survey, released Monday by PwC.

The report depicts an industry grappling with digital transformation, shifting investor expectations, consolidation and “retailization.”

As a result, according to the survey, 73% of asset managers are considering a strategic consolidation with another asset manager in the coming months to gain access to new segments, build market share and mitigate risks.

They are also turning to technology in this transformation effort. Nine in 10 asset managers reported that they already use disruptive technological tools, including big data, artificial intelligence and blockchain, to enhance investment performance.

As a direct consequence of these pressures — along with the drive to deliver at scale amid cost and competitive pressures — PwC expects the 10 largest asset managers to control around half of all mutual fund assets globally by 2027, up from 42.5% in 2020.

Last year was rough for asset managers, with global assets under management falling to $115.1 trillion, nearly 10% below the 2021 high of $127.5 trillion, the greatest decline in a decade.

The survey found that inflation, market volatility and interest rate movements are by far the biggest concerns for both investors and asset managers over the next 12 to 24 months. However, assets under management are expected to rebound by 2027, reaching $147.3 trillion, representing a compound annual growth rate of 5%, according to PwC.

“The rebound in equity valuations over the first six months of 2023 is a testament to the resiliency of the markets and the benefits of diversification,” John Garvey, global financial services leader at PwC U.S., said in a statement.

“We’re in fact already seeing the emergence of a new breed of investment firm: AI tech-enabled, customer-focused and prepared to operate across a wide range of asset types, both within and outside traditional asset and wealth management.”

PwC’s 2023 survey comprised 250 global asset manager and 250 institutional investor respondents.

Disruptive Tech Tools

PwC predicts that assets managed by robo-advisors will reach $5.9 trillion by 2027, more than double the 2022 figure. Individualized indexing is also gaining popularity, particularly among both investors seeking tax optimization benefits and those interested in factor investing, algorithmic portfolio construction and environmental, social and governance investment considerations.

“Existential challenges are sweeping the asset and wealth management industry against a backdrop of social, economic and geopolitical disruption,” Olwyn Alexander, global asset and wealth management leader at PwC Ireland, said in a statement.

“The choice is simple — adapt to the new context or fail. Firms that effectively leverage technology such as generative AI and robo-advisors, build meaningful inroads to new and existing customers, diversify their recruitment and deliver exceptional client experiences will be well-positioned to not only survive, but thrive.”

Some 40% of institutional investors said they plan to invest in custom indexing products in the coming 12 to 24 months, while almost half of asset managers expect to add individualized indexing solutions to their offerings.

By 2027, PwC expects direct indexed assets under management to more than triple by 2027 to $1.5 trillion, roughly 1% of total assets under management. The firm forecasts active ETFs to rise from $4.6 billion to $1.1 trillion, accounting for 7.5% of the global ETF market by 2027.

ESG Focus

According to the PwC study, asset and wealth managers are embracing purpose-led growth and an environmental, social and governance focus in areas such as funding for the net-zero transition and imperatives to improve diversity, equity and inclusion across the industry.

Fifty-seven percent of respondents reported that employees increasingly demand disclosures on the organization’s impact on the economy, and 50% want disclosures over ESG matters. However, only 37% said employers are taking action around improving diversity, equity and inclusion.

Credit: Peshkova/Shutterstock


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