According to ISS Market Intelligence, Global AUM Expected to Reach $43.6 Trillion by 2029
The latest edition of the ISS Market Intelligence's State of the Market: The Future of Retail Products report presents a forecast for the global asset management industry, predicting that assets under management (AUM) will reach $43.6 trillion by 2029. This represents an annual growth rate of 7.1% over the next five years.
Asset managers are expected to benefit from sales growth due to expanding product categories such as active ETFs and private markets, as well as stronger-performing markets in non-U.S. equities. It is anticipated that the waning appeal of cash due to low yields will somewhat accelerate organic growth, with long-term funds expected to net $2.8 trillion by 2029. Taxable bond funds are projected to attract $2.1 trillion in new money, bolstered by favorable demographic factors and declining interest rates.
The report also highlights the increasing popularity of active ETF investment strategies, noting that a significant portion of AUM growth is concentrated in funds less than three years old. Active ETFs are becoming a preferred tool for advisors and a key focus for asset managers in product development. While index ETFs are expected to capture 70% of the $3.1 trillion in ETF flows, active ETFs are anticipated to increase their market share from approximately 2.8% to 4.9% over five years, contributing disproportionately to revenue growth in the sector.
Christopher Davis, Head of U.S. Research at ISS Market Intelligence, commented on the evolving challenges and opportunities for asset managers. Davis pointed to the impact of aging demographics and the market share effects of index funds, as well as the entrance of new competitors from traditional alternative managers. Highlighting both risk and opportunity potential, he emphasized that the rapid development of new products and distribution channels represents a pathway for active managers to succeed.
The report also notes a growing demand for alternative investments. Demand for liquid alternatives has increased, driven by products such as cryptocurrencies and defined outcome funds. Semi-liquid structures like interval funds, projected to reach $83 billion in AUM by September 2024, along with tender offer funds focused on private credit and Business Development Companies (BDCs), represent a promising area for income-seeking managers less affected by passive strategies.
Davis added that the investment landscape has undergone a significant transformation toward active strategies and liquid alternatives in response to growing market complexity and investor sophistication. He advised market participants to remain agile and leverage data-driven insights to navigate the changing environment.
The report also emphasizes the increasing importance of advanced data analytics and sustainability factors in investment decision-making, highlighting that these will continue to influence asset flows and performance outcomes.