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Short-term Pain, Long-term Gain

2020 may not be the year global asset managers envisioned, but it’s unlikely to affect long-term growth prospects according to analysis by Cerulli Associates. In addition, compared to the outlook in March, the outlook is much less bleak than originally projected. 

Cerulli projects that global assets under management (AUM) will decline by $1.7 trillion in 2020, falling from $104.4 trillion (end of 2019) to $102.7 trillion. While a decline of less than 2% may not seem significant, especially given the extraordinary circumstances of this year, it does mark the first decline in global assets under management in over a decade. Declines are expected to occur primarily in the U.S. and Europe. 

However, Cerulli also believes that the long-term growth trajectory of asset management is positive and will be driven by rising demand in developing countries. The firm expects global AUM to top $130 trillion by 2024, representing a solid annualized growth in the 8% range. 

It will take some time for investors to feel comfortable again, and more conservative investment behavior, including increased liquidity, particularly given current overall bond yields and the yield curve itself. This will likely come at the expense of equity investments. 

The lesson for asset managers is three-fold. First, things are not that bad, and, not nearly as bad as projected earlier in the year. Second, is that asset managers need to be aware of and responsive to potential short-term shifts in risk attitudes and subsequent investment preference. Finally, asset managers must take the same long-term view that they recommend to their institutional and retail clients and resist reacting emotionally to the markets.