One in six asset and wealth management firms globally are expected to be ‘swallowed up’ or fall by the wayside by 2027 due to ‘existential challenges’, according to a new global survey by professional services firm PwC.
PwC’s latest industry projections and its global survey of 500 asset managers and institutional investors published in July 2023 revealed that the sector is grappling with such major challenges as digital transformation, shifting investor expectations, consolidation and ‘retailisation’ (the opening up of private market funds).
The survey found that nearly 75% of the participating asset management firms are considering a strategic consolidation with a competitor in the coming months to access new business, build market share and mitigate risks.
More than 90% are also already using ‘disruptive’ technological tools – including big data, AI and blockchain – to enhance investment performance.
As a direct consequence of these pressures and the drive to deliver at scale amid cost and competitive pressures could lead to the top ten largest asset managers controlling around half of all mutual fund assets globally by 2027 up from 42.5% in 2020.
The survey found that inflation, market volatility and interest rate movements are by far the biggest concerns for both investors and asset managers in the next 12 to 24 months. However, AUM are expected to rebound by 2027, reaching $147.3tn, representing a compound annual growth rate of 5%.
The survey found that Asia-Pacific, along with emerging markets in Africa and the Middle East, will set the pace of growth in AUM. In PwC’s base-case scenario, growth rates in Asia-Pacific will be roughly 50% higher than in North America by 2027.
PwC US global financial services leader John Garvey said, “We are 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.” M