The largest 500 asset managers by assets under management saw their total discretionary assets decline by $18 trillion, or 13.7% in 2022, according to research from WTW’s Thinking Ahead Institute. At the end of the year, AUM at the largest 500 asset managers was $113.7 trillion.
While the difficult investment climate in 2022 was cited as responsible for the drop in assets under management, WTW’s Jessica Gao, associate director of research at the London-based Thinking Ahead Institute, said challenges from system-level risks, such as climate change and other sustainability issues, continue to mount.
Asset declines varied by region. According to the report, Japanese managers within the top 500 lost an average of 5.5% in assets, while North American and European managers saw average declines of 14.2% and 16.8%, respectively. North American managers accounted for 59.5% of all AUM within the top 500 managers, equaling $67.7 trillion at the end of 2022.
Of the largest 20 asset managers, 14 are in the U.S., and the other six are European. More than half (12) are independent firms, six are bank-affiliated and two are owned by insurance companies, WTW found.
2022 was a turbulent year for the markets, with high inflation, interest rates and geopolitical tensions all having negative effects. Gains made in the bull market of 2021 were largely wiped out in 2022, according to the report.
“As we have conducted this research, a common theme throughout our conversations with managers has been to expect a higher-for-longer regime in interest rates in which concerns about inflation and growth remain elevated, suggesting investment managers are not out of the woods yet,” Gao said in a press release. “The need to consider sustainability issues and adapt to systemic risk means forward thinking and robust investment processes that are able to model and measure risks like never before. Looking ahead, this awareness of system-level risks could offer support to the investment world as it grapples with the generational challenge of climate change impacts and other sustainability issues.”
According to the report, the average asset allocation for 2022 was 45.1% in equities, 32.3% in fixed income, 7.9% in cash, 7.1% to alternative investments and 7.6% to other asset classes (including balanced funds/strategies, multi-asset funds, derivatives, commodities, private debt and others). Equities also had the largest decline, at 19.6%. Fixed income followed, declining 14.5% during the year. Alternatives declined 7.2% in 2022.
The research also found that investment in passive strategies accounted for 34.7% of the total market, up four percentage points from its share one year earlier. Actively managed assets represented 65.3% of the total, down two percentage points from the prior year.
The value of actively managed assets decreased 19% in 2022, while the value of passively managed assets dropped 13.7%, WTW’s research found.
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