Global fund industry assets under management (AUM) are projected to continue growing over the next five years, and that growth will likely be driven by emerging markets, according to a new report from Boston-based Cerulli Associates. The prospects for developed markets, such as Canada, are notably dimmer.

Global AUM will rise in the coming years, led by markets in Latin America and Asia (ex Japan), the report states. “In emerging markets, rising incomes, the expansion of the middle class and improved financial literacy will fuel demand,” the report says.

These factors are expected to produce double-digit compound annual growth rates (CAGRs) in markets such as Brazil, China, Korea, Mexico, and Chile, Cerulli states. In developed economies, the report adds, factors such as access to defined contribution pension plans and “an increased focus on retirement savings will underpin mutual fund growth.”

The report groups Canada with the U.S. and Japan as countries that will see CAGRs of less than 5% in retirement-driven growth opportunities. The overall retail opportunity for Canada and the U.S. is projected as between 5% and 10% CAGR, alongside developed markets such as the U.K., Germany, Australia and Italy.

Conversely, the report says, markets such as India and China “represent a massive growth opportunity” for the asset-management industry.

“The expanding middle class and increasing number of high-net-worth individuals in China and India will help ensure robust AUM growth in both countries,” says André Schnurrenberger, managing director, Europe, with Cerulli Associates, in a release. “Over the past four years, India has recorded AUM growth of more than 20%, achieved through a combination of new flows —particularly into equity and balanced funds — and market performance.”

While the growth prospects of developed and emerging markets are starkly different, the report says, there are similarities in both markets. “Regulation is driving down fees and pushing flows into passive funds,” the report states. And asset managers are increasingly adopting digital technology as a way to serve investors in both markets.

“With downward pressure on fees — and the accompanying migration from active to passive [management] — set to persist, managers in developed markets are turning to technology to improve operational efficiency,” says Justina Deveikyte, associate director of European institutional research at Cerulli.

The report adds: “The enhanced use of data and technology is enabling managers to identify the clients their products are best suited to and to propose fresh investment ideas, as well as generate alpha. Access to data is also changing the way asset managers integrate environmental, social and governance (ESG) factors, enabling new investment themes. By using artificial intelligence and big data, managers can gather more frequent and granular data and perform real-time analysis of ESG investments.”