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Rating:Cerulli Releases Global Fund Manager Rankings Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, June 25, 2007

Cerulli Releases Global Fund Manager Rankings

Reported by Erin Kello

Cerulli Associates has released its global rankings of fund managers, with the big movers being the result of mergers. Highlights include:

- BlackRock, which now counts Merrill Lynch’s assets, has made it to #9 spot with assets of US$1.1 trillion.

- The merged entity of IXIS and Natexis is now at #14 spot.

- Capital made it into the top five.

- Both State Street and Fidelity Investments have moved up a notch each (to #2 and #3, respectively) - French giant AXA took the #4 spot.

- Barclays Global Investors retained its #1 ranking, while at the other end Nordea Investment Management broke into the top 50.



Cerulli Associates, a leading financial services and asset management research firm, estimates that professionally managed assets surpassed US$48 trillion at the end of 2006, rising US$5.8 trillion over the previous year and adding just under US$15 trillion since 2003. Global assets will continue to rise to US$74 trillion by 2011, a five-year CAGR of 9%, according to the firm's flagship international report, Cerulli Quantitative Update: Global Markets 2007.

The global asset management industry as a whole is on the rise. There have been real efforts to create product innovation. The advisory industry continues to evolve and grow across multiple markets and new and emerging markets such as China, India, and several Eastern European countries are creating capacity for future growth. However, there may also be a need for some reflection. A weaker U.S. dollar—as we've had for the last couple of years—tends to make global top-line numbers appear bigger than they did in the past.

Some markets appear as though they are beginning to overheat, while stock market growth in other markets suggests valuations are stretched. Global Markets, in its fifth iteration, also points out that in the long term, the assets of the developed world (largely, the United States) and the rest of the world will converge. As several international markets outside of Western Europe and the United States begin to feel the same effects of an aging population, these developing markets will accelerate savings for retirement. As this happens, growth rates in the United States and in other international markets will diverge, and Cerulli Associates says it has begun to see that happen over the past three years, with significant divergence in 2006.

Overall growth forecast for both the U.S. and non-U.S. markets has increased, with a significant step-up in CAGR in international markets. Europe and Asia remain the twin engines of international growth, but the United States remains the most important asset management marketplace in world, both in terms of size and industry innovation in certain key areas. The following are Key Findings from Cerulli Quantitative Update: Global Markets 2007.

It has been a very good couple of years for the global asset management industry, at least in terms of top-line asset growth. Inflows have been strong, aided by very robust stock market performance in many of the countries in this analysis. In absolute terms, CA estimates that professionally managed assets surpassed US$48 trillion at the end of 2006, rising a substantial US$5.8 trillion over the previous year and having added just under US$15 trillion since 2003. Global revenues are also up sharply.

In the long term, the assets of the developed world (the United States, in the main) and the rest of the world will converge. There seems little doubt of that, especially as several international markets outside of western Europe and the United States begin to feel the same effects of an aging population and the need to accelerate savings for retirement. For that to happen growth rates in the United States and other international markets need to start diverging, and we have begun to see that happen over the past three years, with significant divergence in 2006.

The allocation to equities was at an all-time high of 54.4% at the end of 2006, and some of this can be explained by the recent strong stock market run in several of the world’s major markets. The importance of bonds in Continental Europe is a well-understood point, but less well understood is the growing importance of fixed-income assets in the Far East, where a combination of government and institutional demand for longer-dated international fixed-income assets and retail demand via structured products is driving growth there.

Global mutual fund assets stormed ahead in 2006, not quite closing the year at US$20 trillion but coming pretty close to register a four-year CAGR of 14.3%. To the end of our forecast period of 2011, CA has a more modest five-year CAGR of just under 10%, which would suggest that globally mutual funds will hold more than US$30 trillion in assets. The more modest forecast is based on a couple of different assumptions, including the fact that over the medium to long term the overall size of Asia’s mutual fund industry will increase, but with growth slowing down. The other is the competitive impact of mutual fund alternatives, such as exchange-traded funds (ETFs) and structured investments. CA survey respondents represent some of the largest and most influential asset managers in the world, and as our global data suggests the share of the U.S. marketplace, which continues to dominate the rest of the world by some margin, is begin to decline as some of the faster-growing markets begin to add on assets. CA does not expect to see a reversal of this trend any time soon.

If there was any doubt that insurance firms are the biggest institutional investors in the world, data in this exhibit should more than dispel that notion. What is also noteworthy is that the share of this segment continues to rise. Insurance companies out-sourcing some of their assets to unaffiliated asset management firms is now a global phenomenon, and one that is going to continue to grow in the years ahead. This trend is firmly entrenched in the United States, well developed in Europe, and now taking root in Asia and other emerging markets.

Projected growth of global revenue has flattened with a five-year CAGR to 2011 of 7.9%, compared to a historical four-year CAGR to 2006 of 9.1%. Fees are expected to decline exponentially (i.e., smaller decreases in later years). In absolute terms, the depreciation of the U.S. dollar against other majors like the euro and some of the Asian currencies contributes to the rise in global revenue (in U.S. dollars). Even the most disinterested cannot help but be aware of the amazing growth that the Chinese asset management industry has seen in 2006, and one that continues into 2007; and this is reflected in the step change in CA’s growth forecasts for that coun- try.

Several countries in our review had one of the best years for their respective asset management industries. The big movers in the 2006 rankings of fund managers are the result of mergers: BlackRock, which now counts Merrill Lynch’s assets, has made it to #9 spot with assets of US$1.1 trillion, while the marriage of IXIS and Natexis has resulted in a #14 spot for the merged entity called Natixis. Capital made it into the top five, while both State Street and Fidelity Investments have moved up a notch each (to #2 and #3, respectively), with French giant AXA taking the #4 spot. Barclays Global Investors retains its #1 ranking, while at the other end Nordea Investment Management broke into the top 50.  

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