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The term “asset management” refers to the financial service of managing assets by means of financial instruments with the aim of increasing the invested assets. Thus, an asset manager is a company whose business purpose is managing wealth. Asset managers bundle a person’s savings and invest them as profitably as possible in the world economy.
Investment opportunities include government financing through sovereign bonds, private sector financing through equity or bond purchases, and financing infrastructure needs, with the aim of generating a return that is shared between the asset manager as remuneration and the investor as their return.
Asset Management—the industry of managing wealth
In Germany, the correct banking supervisory term for asset management services pursuant to Sec. 1, Para. 1a No. 3 KWG (German Banking Act) is ‘portfolio management’ (Finanzportfolio-verwaltung). In contrast to financial or investment advice, asset management not only provides investment suggestions in the form of an advisory service, but the asset manager makes and carries out investment decisions autonomously.
Owing to their business purpose, asset managers either operate as independent companies or as subsidiaries and divisions of banks and insurance companies. They manage the assets of institutional investors (such as pension funds, insurance companies, banks, foundations, charitable or state institutions) and/or private investors.
Asset managers use special mandates or funds to manage these assets, which in turn are subdivided into special funds for exclusively institutional investors and mutual funds for institutional and private investors.
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Development and status quo
Asset managers manage more than EUR 85 trillion globally. The US market is by far the largest, with a share of around 60%, followed by Europe with a share of just over 30%. Asia’s currently still relatively small market size is indicative of the emerging market status of its countries. Its growth rate of around 24% p.a. over the last five years, however, is more than twice that of the US and Europe, which nevertheless continue to grow at a respectable and stable 10% p.a.
The asset management industry is characterized by a strong global market concentration. While more than 4,200 companies operate in this sector in Europe alone, the 400 largest companies worldwide hold more than 80% of all assets under management. The top 10% of this group, i.e. the 40 largest asset managers, dominate around 50% of the market, and the top ten asset managers account for a quarter of the market share.
Asset management in Europe
One of the best kept secrets of most asset managers is how they distribute their assets under management (AuM) among the countries in which they operate. For the most part, they only publish a total. Identifying the major European asset managers therefore requires market expertise in conjunction with global assets under management. For the European asset management study, zeb has identified and analyzed the following companies as being of central importance for the European industry.
Asset management in Germany
The German fund market, whose statistics are maintained and published by the German fund association BVI, offers a relatively good level of transparency. These statistics reveal that the German fund market is the largest in Europe with approximately EUR 2.6 trillion in assets under management in 2018 and is growing at a rate of around 8% p.a.
Institutional investors hold the largest share of assets under management (AUM) of over 60% in special funds. This market segment is growing at a rate of 9% p.a., thus outpacing the mutual fund segment, which accounts for less than 40% of the market and only grows at a rate of 6% p.a.
An asset manager’s growth is measured by its managed assets. It consists of the performance of the market in which the managed assets are invested and the inflow of net new money (NNM). 2018 marked a historically unprecedented year for the asset management industry, which in some cases even shrank due to the sharp downturn in the stock market in the fourth quarter. A competitor comparison in the German fund market reveals that German asset managers are among the medium-sized to small providers in terms of their global assets under management, but dominate the German fund market. The five top German providers together share more than 60% of fund assets, whereas foreign players account for just over 20% of the market.
Fit for the future?
zeb carries out a study on the well-being of the European asset management industry every year.