Despite facing myriad challenges over the past year, many linked to the ongoing Covid-19 pandemic, the global asset management industry has witnessed continued growth. Global assets under management grew by 10.3% year-on-year in 2019 and by 4.1% in 2020, according to Cerulli Associates, which forecasts a growth of 5.8% in 2021.

Asset managers around the world are recalibrating their approaches and outlook to remain competitive, with many devoting resources to product innovation and finding ways to improve operational efficiencies through better use of technology, the research and consulting firm says in its latest report.

“Covid-19 has had less of an impact on the global asset management industry than many expected at the start of the pandemic,” says André Schnurrenberger, managing director, Europe, at Cerulli Associates. “Assuming that the coronavirus outbreak is brought under control, we expect AUM in the United States to continue growing; we also expect non-US assets to keep increasing over the next five years, with a growing middle class and improved financial literacy fuelling demand in developing markets.”

The pandemic has encouraged saving, and more individuals, especially younger people, have shown interest in investing over the past year. For example, the client base of Hargreaves Lansdown, the largest direct-to-consumer platform in the United Kingdom, stood at 1.5 million in February 2021, up 84,000 from June 2020.

Cerulli believes that asset managers have an opportunity to capitalize on this growing interest by offering attractive product ranges while simultaneously educating people on the benefits of long-term investing.

In terms of asset classes, many investors believe that emerging markets, particularly in Asia, are making better progress in their economic recovery from Covid-19. As a result, investors are eager to increase their exposure to such markets.

In addition, value-driven products tied to real-world issues such as climate change and digitalization have seen their popularity accelerated by the coronavirus pandemic. Managers should seek to offer products that meet this demand, Cerulli says.

Fee pressure remains a challenge for asset managers. In the US, managers continue to face fee compression because investors now have several ways to access lower-cost products – through a change in provider, new share classes, or exposure to strategies through different vehicles.

Managers face high buyer power, low supplier power, strong existing competition, high threat of substitution, and high threat of new entry. Many are responding by offering niche services and products – those with specialist expertise in popular areas can not only ease fee pressure, but may be able to charge premium prices.

“Overall, the global asset management industry’s 2020 was much better than anticipated and, provided Covid-19 is brought under control, the outlook for the sector is generally positive,” says Schnurrenberger. “We expect managers that emphasize the quality of their products and focus on meeting their clients’ needs to be best placed to succeed over the coming years.”