According to BGG's 20th annual report on the global asset management industry, entitled From Tailwinds to Turbulence, new funds have struggled to stand out against established funds with a long-term track record of success.
The outlook for legacy funds has been so positive that there has been no incentive for investors to take a chance on newer products with short track records, resulting in the number of new funds shutting down climbing steadily over the last decade.
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"Older products benefit from the historic compounding effect of the returns on the underlying assets, allowing the asset management industry to function as something of a money-making machine fueled by its compound annual growth rates," the report states.
Dean Frankle, managing director and partner in BCG's financial practice, told Investment Week: "Our research shows that investors favour products with proven value. We would anticipate even greater focus on this if there is a market downturn with investors even more conscious of risk/return trade off."
By 2021, AuM in passive products had grown at four times the rate of its actively managed equivalents. However, the passive market is highly concentrated: the top 10 global firms have received roughly 75% of all new capital over the last 5 to 10 years.
According to the report, the active space is significantly more fragmented. This, along with new inflows coming from the rise of retail investors, presents a "wealth of untapped potential" and "more room to win" for asset managers.
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Beyond public markets, the BCG expects sustained increase in allocations to alternatives such as hedge funds and private equity over the next five years, with private equity projected to rise at a considerably quicker rate than traditional assets.
Net-zero by 2050 objectives also present opportunities for the asset management industry, the report states. BCG estimate $100-150trn in capital deployment to reach net-zero goals by 2050, translating into $20-30trn in bond and equity allocations for asset managers.