- The biggest asset managers keep getting bigger, collecting a record share of capital in 2018.
- BlackRock’s exchange-traded-fund platform, iShares, has been the biggest beneficiary of increasing interest in passive strategies, expanding its assets more than 100% in five years, according to Morningstar data.
- Vanguard brought in the most money for US mutual funds and was second to exchange-traded funds for capital this year.
The biggest asset managers keep getting bigger.
Data from Morningstar collected with just days left in 2018 shows that BlackRock is close to cracking $100 billion in new money this year alone for its exchange-traded-fund platform, iShares. The $1.4 trillion business has increased its assets more than 100% since 2013, per Morningstar figures.
Vanguard, which ended 2017 with $4.9 trillion total assets under management, is close behind in growth across mutual funds and ETFs, expanding its platform nearly 100% over the same time period.
The largest 20 managers now oversee 43% of assets, according to an October study by advisory firm Willis Towers Watson — a record concentration since the study’s 2000 founding.
“The asset management industry is facing a period of massive change and disruption resulting from the confluence of several global megatrends: technological, demographic, economic, environmental and social,” the study’s authors wrote. “The successful asset management firms over the next few years won’t dodge these industry realities.”
Passive strategies continue to dominate over active strategies, with $398 billion in inflows this year so far, according to Morningstar data. Meanwhile, active strategies saw $156 billion in outflows.
Active funds have suffered outflows for years as individual investors turn to cheaper, and often better-performing, passive strategies.
“The index-investing industry has been growing rapidly, with ETFs as a major beneficiary, driven by the migration from commission-based to fee-based wealth management, clients’ focus on value for money, the use of ETFs as alpha tools, and the growth of all-to-all trading in fixed income,” BlackRock Chief Financial Officer Gary Shedlin said at a conference earlier this month.
Out of the passive managers, BlackRock continues to dominate. Last month, the firm saw record passive inflows, and it’s on track for an even bigger haul this month, according to Bloomberg data.
Meanwhile, Vanguard dominates in the mutual-fund space, picking up over $75 billion this year.
While investors have typically picked passive strategies in search of better returns and lower fees, active funds returned -1.7% in the year as of November 30 — beating passive funds’ -3.2% return, according to Morningstar. Both strategies returned under the S&P 500’s 5.1% rate for the same time period. Data was not yet available to reflect December’s continued market volatility.
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