Deglobalization to Dominate Asset Management by 2030, With Cross-Border Strategies Taking Less Than a Fifth of Investment Flows: Indefi ReportPARIS and NEW YORK
Indefi, a leading strategy advisor for asset managers worldwide, today introduced new research showing that globalization, a major trend in the asset management industry for the last 20 years, will atrophy by 2030, with less than one fifth of investment flows entering cross-border investments.
According to Indefi, asset managers will increasingly struggle to run global enterprises, as cross-border investments shrink. The new research paper ( https://c212.net/c/link/?t=0&l=en&o=3468769-1&h=1872958447&u=https%3A%2F%2Fwww.indefi.com%2Fwp-content%2Fuploads%2F2022%2F03%2FIndefi-Strategy-The-Future-is-Now.pdf&a=paper ) entitled “The Future Is Now: Five Waves Reconfiguring Asset Management,” predicts that from now until 2030, domestic equity, fixed income and alternatives markets will garner nearly $20 trillion in net new money, almost four times more than the $4.5 trillion in net flows into international equity, fixed income and alternatives markets over the same period. Additionally, 85% of investments will be in local versus cross-border investments by 2030, versus 74% in 2021, a substantial shift.
This trend also is fueled by another significant wave in asset management: the importance of the individual, not the institution. According to Indefi, by 2030, retail investors will account for more than 61% of global assets under management, up from 52% in 2021. Institutional assets meantime are slowly losing ground, from 31% in 2021 to a projected 26%, out of a total $175 trillion by 2030. Similarly, by 2030, 67% of the revenues in the industry will come from retail investors, versus 61% in 2021. This shift is helping fuel deglobalization too as retail investments are typically more regulated than their institutional counterparts. With more money “staying home” and in retail vehicles, deglobalization will accelerate.
In addition, Indefi’s new research demonstrates that China will provide nearly half (45%) of net new investment flows for asset managers by 2030 versus 29% of the total from the U.S. and will comprise almost one fifth of the overall assets in the asset management industry by 2030. While the U.S. will continue to be the largest market in terms of assets under management (AUM), China will account for 18% of total global AUM by 2030, up from 11% in 2021, while the U.S. market will decrease from 52% of AUM in 2021 to 46% by 2030. Meanwhile, Europe and the U.K. should maintain approximately the same percentage of global AUM, with the U.K. capturing only 2% of net new investment flows through the end of the decade.
The new research defines and examines five secular trends that will vastly alter the asset management industry:
— Individual investors will dominate
— Globalization in asset management will shift to more domestic investments
— Outcomes, including sustainability, will be more important than returns
— An expanded investment toolkit will include private markets and
— Artificial intelligence will play a growing role in the investment
“If a portfolio manager teleported from 2020 into 2030, they would most likely not recognize their industry,” said Daniel Celeghin, an Indefi managing partner and co-author of the paper. “With the increasing importance of retail in asset management, more domestic investments gaining traction, technology such as artificial intelligence and cryptocurrency making significant inroads, and the growing footprint of China, we expect the 20th century norms of asset management to be substantially altered by the end of the decade,” he said.
In the new paper, Indefi also shows that investments in cryptocurrency are already larger in market capitalization than the entire high yield bond asset class, and about half as large as the full municipal bond market. And artificial intelligence will gain traction in the industry, not yet in replacing portfolio managers, but more in assisting investment, distribution, and business leadership professionals to do their jobs more efficiently.
Founded in 2007, Indefi is a strategic consulting firm that serves the asset management industry. The firm’s executives have partnered with more than two thirds of the world’s largest asset and wealth managers, with a focus on developing and implementing growth strategies. Headquartered in both Paris and New York, Indefi’s expertise spans across the Americas, the United Kingdom, Europe, Asia, and Australia. The firm focuses on the business of asset management: market entry, product development and enhancement, sustainability strategy, organizational design and incentives, acquisition support, and other drivers that enable growth. Indefi is a UN PRI signatory. For more information, please visit www.indefi.com.
Source: INDEFI Group