Assets managed by the world’s largest 500 fund managers rose by 16% in 2009 to US$62 trillion at the end of the year, according to new research from professional services firm Towers Watson.

The gain follows a year in which total assets were down 23%, but the survey notes that assets are still below 2006 levels. The research, conducted in conjunction with Pensions & Investments, also finds that the top 20 managers’ share of total assets increased from 38% to over 40%.

“2009 was almost the exact opposite of 2008 with the majority of fund managers posting strong results,” said Carl Hess, global head of investment at Towers Watson. “However, while the markets continue to recover, there is a fragility and volatility about them which reflects the weak underlying economic fundamentals and the oscillating risk appetites among institutional investors.”

“The larger firms were again the main beneficiaries of the rebound and increased their share of total assets to the highest levels since the research began,” said Hess. “Market returns, new inflows, performance fees combined with reduced overheads will have eased the pressure on asset management firms bringing most of them back into profitability.”

Towers Watson points out that bank-owned asset managers continue to dominate the top 20, although BlackRock is by far the top firm with more than $3.3 trillion under management. State Street Global ranks second, and Allianz Group is third. Of the top 20 firms, 12 are based in the US and the other eight are European.

The top ranking Canadian companies in the survey are life insurers, led by Manulife Financial in 37th place with just under $419 billion in AUM. Sun Life Financial is close behind in 39th place, and Great-West Lifeco ranks 50th. Royal Bank is the top ranked Canadian bank in 65th place in the survey.

The survey notes that Canadian managers have gained global market share over the past 10 years, joining firms from France, Germany, Italy, Spain and Belgium, as countries that have gained share. Managers in the UK, Switzerland, Japan and Australia, have lost share over that period. Indeed, during the period, Japanese asset managers’ AUM have fallen from over 13% to under 7%, it says. At the same time, firms from developing countries have continued to grow and have more than doubled their share of the assets to around 4% during the past 10 years.

“While currency movements have played a role in these trends, institutional investors are looking for exposure to new growth markets resulting in significant inflows and performance for those managers that are well-placed in these markets,” noted Hess.

Assets managed by major passive managers have grown consistently during the past 10 years, the survey also found. In 2009, passive assets rose by 62% to US$7.3 trillion, from US$4.5 trillion the year before, largely reflecting the inclusion of BlackRock’s passive assets in the survey for the first time.

“Passive management remains a growth business as more institutional investors have concluded that their governance arrangements are stretched thin in overseeing the successful active management of their assets and have added to their passive core,” added Hess.

IE