Changing Landscape of Asset Management

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People say BlackRock/Vanguard owns global capital.

And now, real assets are the new fancy.

How does this tie together?

Today, we cover:

  • Consolidation in Asset Management

  • Why Real Assets?

  • What does it take to win in Asset Management?


Consolidation in Asset Management

73% of asset managers launching new products are focused on new fund strategies.

It’s nothing but a response to changing environments where typical products are unlikely to provide double-digit returns.

PWC estimates that, by 2027, 16% of existing asset managers will have been swallowed up - twice the historical rate of turnover.

It’s an industry that the big players have commoditized through low-cost passive investment products:

Access to the retail investor’s capital

Leverage to raise more from risk-taking HNI’s

As a result, industry players are forced to expand their product offering, ie. looks at alternative asset classes.


Why Real Assets?

In mid-January, private market giant BlackRock agreed to acquire Global Infrastructure Partners, a fund manager that specializes in the energy, transport, digital, water and waste sectors.

A step towards their inevitable destination: everything.

At the end of 2022, real assets (infrastructure and commodities) generated stronger returns on average than PE, VC, real estate, and private debt.

The thesis hinges on two major changes to the economy over the next 20 years:

  1. Carbon Transition

  2. Digital Infrastructure

They will require new capabilities and investments to be carried out.


What does it take to win in Asset Management?

It seems that focus and concentration in an asset class is not rewarded anymore.

The grass is greener on the other side.

As a result, it might be a good idea for firms to:

Go back to the customer - How has their definition of success changed?

Embrace experimentation and change - What asset classes deserve a closer look?

Scale with competitors - Would an acquisition of another manager increase leverage?

For industry players, the choice is simple—adapt to the new context or fail.

See you next week.