Competing For Growth
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Our 2021 edition of the wealth and asset management report with Morgan Stanley offers an overview of industry trends and analysis of the industry.

The outlook for the industry shows that wealth and asset managers face a common set of challenges and opportunities. This is driven by the macroeconomic environment, shifts in client demand and the continued evolution of technology to deliver improved investment and advisory solutions. 

A strong layer of commonality in key growth opportunities for wealth and asset managers

By 2025, we expect each to represent a significant opportunity in their own right: 

  • Total private markets fund AUM of ~$13TN
  • Total ESG fund AUM of ~$6.5TN
  • Bitcoin ETF AUM ~$0.3TN
  • Direct indexing managed accounts AUM of ~$1.5TN
Key growth opportunities for wealth and asset managers

Private markets – Access for all

Robust private markets growth continued in 2020 and now exceeds $7TN total AUM. We expect this strong growth to persist with AUM of ~$13TN by 2025, driven by the demand for yield and inflation protection and the emergence of new supply-side drivers, most notably the development of structures and delivery models designed to open access to retail wealth investors.

Private markets allocations by investor type (2020-2025, %)

ESG – beyond Europe, beyond screening, beyond ‘E’

ESG considerations have already been a major driver of opportunities for wealth and asset managers. We expect the next wave of opportunity to come from three macro shifts: ‘beyond Europe’ into other geographies, particularly the US; ‘beyond screening’ into a combination of thematic and impact strategies; and ‘beyond E’ into social and governance themes.

ESG success factors along the wealth management lifecycle

Cryptocurrencies – Time to decide and act

Institutionalization of crypto creates a significant opportunity for wealth and asset managers. Total market capitalization of cryptocurrencies has hit new highs, exceeding $2TN in April 2021, up from under $50BN four years ago.

Asset managers who want to participate in crypto should consider a range of product responses, from including crypto assets as part of an existing multi-asset fund, to having dedicated passive or active crypto products, to offering structured solutions. 

Larger wealth managers will need to decide how to participate, while smaller players can still decide whether this is a market they want to enter. An important segment of private investors will continue to seek exposure to crypto, including younger and more technology savvy asset owners, and wealth managers will need to develop an offering to meet their demand.

Asset managers' potential crypto product offering responses

Customization – Bridging the gap between bespoke and standardized

Access to customised portfolios has so far been the preserve of institutions and UHNWIs due to the high cost, high-touch model required and limited scalability of such offerings. At the lower end of the wealth spectrum, the industry is moving toward increased standardization through model portfolios.

But new technology allows wealth managers to offer customization further down the wealth spectrum, at much lower cost through automation. This is an opportunity to ‘bridge the gap’ between UHNWI and core HNWI. But they also need to ensure this does not hamper progress made on standardization.

Spectrum of customization offerings for wealth managers (illustrative)