Australian asset growth dampened by strong US dollar

Although total assets under management (AUM) of the world’s largest 500 managers grew to US$81.2 trillion in 2016, representing a 5.8 per cent increase on the previous year, the increasing US dollar strength has dampened growth in Australia, according to Willis Towers Watson’s Global 500 research.

AUM for North American managers increased by 7.7 per cent over the period, amounting to US$47.4 trillion, while assets managed by European managers increased by 2.8 per cent to US$25.8 trillion.

At the same time, UK-based firms saw AUM decline for the second consecutive year, falling by 4.5 per cent in 2016 to US$6.3 trillion.

The study also found that although passive assets remained significantly smaller than actively managed assets, the proportion of passively managed assets grew from 16.5 per cent to 21.6 per cent over the last five years alone.

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Willis Towers Watson, Australia’s director of manager research, Dania Zinurova, said: “We expect this trend will continue to put downward pressure on traditional fee structures, particularly amongst active managers seeking to remain competitive and to maximise value to investors.”

The 20 largest asset managers also saw a 6.7 per cent increase in AUM to US$34.3 trillion.

Also, of the Australian-based managers, Macquarie Group remained among the Top 100 asset managers globally while Colonial First State moved to a lower rank of 102 on the global list.

Th research also found that alternatives continued to grow in popularity as investors remained under pressure to diversify in an environment of lower expected returns from traditional asset classes.

“Australian-based asset managers specialising in alternatives remain in a strong position,” Zinurova said.

“Our research has also highlighted awareness in sustainable investing, with 78 per cent of the firms surveyed acknowledging a growing interest from their clients for these sorts of strategies as they continue to look for ways to add value for clients.”