In the tough global asset management arena the insurance
industry is losing ground in the contest for market share,
indicates a study undertaken by consultancy Watson Wyatt. This was
particularly evident in 2007 when the industry conceded
considerable market share to independent asset managers.
According to Watson Wyatt, based on the top-20 players that
accounted for 37.5 percent of the $69.4 trillion managed at
year-end by the 500 largest players, insurers’ market share fell to
20 percent in 2007 – the lowest level in 10 years and significantly
below a peak of 35 percent achieved in 2004.
Of the top-20 players in 2007, only two were bancassurers – ING
Group and BNP Paribas. Three were insurers – Allianz (then a
bancassurer), AXA and American International Group.
The ranks of insurers/bancassurers in the top-20 list were also
thinned in 2007 with UK insurer Aviva slipping from 20th position
in 2006 to 22nd. Aviva grew AUM by only 3.7 percent in 2007 to $727
However, there were strong showings by other insurers, in
particular Allianz, which moved from fifth position in 2006 to
third position in 2007 on a 14.6 percent rise in AUM to $1.956
trillion. ING also did well to improve its ranking from 16th in
2006 to 15th in 2007, with a 19.4 percent rise in AUM to $946
Last year was also characterised by a sharp decrease in the
global asset management market’s growth rate with total assets
under management (AUM) increasing by $5.7 trillion to $69.4
trillion – an increase of 8.9 percent compared with 2006. This
increase was down from the 19 percent achieved in 2007 and a CAGR
of 15.6 percent between 2003 and 2006, years of robust growth for
North America on the rise
North America ousted Europe as home to the largest chunk of AUM
in 2007, with $31.57 trillion – 45.5 percent of the total. North
America also reflected the highest growth in AUM at just under 11
percent. European asset managers slipped as a result of a
pedestrian 5.5 percent increase in AUM to $30.29 trillion. Japanese
asset managers’ AUM were largely unchanged at just over $4.4
In Europe, the UK retained its position as the leading supplier
of asset management services, ending 2007 with total AUM of about
$8 trillion (end-2007 exchange rate), giving it a market share of
11 percent – the highest in 10 years and second only to the US,
which commanded a market share of 41 percent.
UK insurers acquit themselves well in the asset management
industry and in 2007 accounted for 30 percent of total AUM in the
UK, according financial services industry body International
Financial Services, London (IFSL).
In the top-three market positions, insurers were followed by
banks (29 percent) then independent fund managers (27 percent). The
highest market share was held by insurer Legal & General with
AUM of £293 billion ($475 billion), giving it a market share of 7.1
Top-20 growth faded in 2007
On a global basis, of notable significance in 2007 was that the
top-20 asset managers experienced a lower growth rate than the
overall market, with their total AUM increasing by 5.7 percent to
$26 trillion. This was a significantly slower pace than in 2006
when AUM grew by 23 percent and the CAGR of 16.6 percent achieved
between 2003 and 2006.
Last year had two distinct parts, commented Watson Wyatt’s
global head of manager research, Craig Baker.
“The first part saw buoyant markets which drove asset gains, the
second saw most of these erased,” he explained.
He continued that the largest asset management companies, which
are normally the main beneficiaries of growth, grew at their lowest
rate compared to other asset managers since Watson Wyatt’s survey
began in 1997.
“Certain medium-sized boutique firms, particularly those running
alternative assets, would have added significant assets during the
year, as would have some passive houses,” Baker said.
Indicative of growth in the alternate investments sector, IFSL
estimates that AUM by hedge funds ended-2007 at $2.25 trillion, an
increase of 30 percent compared with the end of 2006.
IFSL also estimates that the number of hedge funds grew by 12
percent to over 11,000 by the end of 2007. About three-quarters
were single-manager hedge funds and the remainder fund of hedge
However, asset managers in conventional and alternate asset
sectors face daunting prospects in the wake of a collapse in global
For example, between January and mid-October 2008 the US
S&P500 Index was down 34 percent, almost equaling its worst
12-month decline in six decades, a 41 percent fall between
September 1973 and September 1974.
During the most recent market slump between late-2000 and
late-2002, the top-20 asset managers saw their total AUM grow by 1
percent in 2001 and fall by 1 percent in 2002, according to Watson
Wyatt. AUM of the top 500 managers experienced no growth in 2001
and 1 percent growth in 2002. The S&P500 Index fell by a third
during the slump.
The current market situation clearly does not bode well for
asset managers in 2008 and quite probably 2009.
Indicative of the impact of sharply slower growth or declines in
AUM on profitability, IFSL data indicates that the average profit
margin (profit to revenue) achieved by UK fund managers ranged
between about 29 percent and 33 percent between 1997 and 2000
before falling to a low of about 17 percent in 2001. In 2007, UK
asset managers achieved a margin of 32 percent, the highest in five
A indication that profits are under pressure came in October
from Henderson Group, a UK asset management company with AUM of £53
billion. In a statement Henderson warned that it was experiencing
pressure on assets under management and fee income and would not
meet its profit forecast.
Henderson will certainly not be the only asset manager
delivering an unpleasant message of this nature.