Study reveals the increasing global dominance of US asset managers | University of Oxford

Study reveals the increasing global dominance of US asset managers

19 August 2015

New York has dominated growth in the asset management sector since the crisis of 2008-09, taking an even more commanding lead over rivals, says a working paper by Oxford University researchers. The researchers found that by 2012, the US held 48.7% of all global assets under management, with the UK at 8.1%, Germany, France, Japan at around 7%, and Switzerland trailing in sixth place at 4.3%. The top ranked asset manager was New York-based BlackRock, which in 2012 held 55% more assets than its next competitor while two other US firms – State Street and Vanguard – were also in the top four firms globally for asset management, says the paper.

The researchers Duncan MacDonald-Korth and Professor Dariusz Wojcik will present the paper at the world’s biggest ever economic geography conference, hosted by the University’s School of Geography and the Environment and the Smith School of Enterprise and the Environment. The paper investigates the impact of the global financial crisis on the asset management industry. The crisis has resulted in a wealth of new regulation in the West which many had predicted would lead to an exodus of business towards Asia. Yet, the paper shows that Asian financial centres did not do as well as many had expected. By the end of 2011, the Asia-Pacific region held 11.4% of total assets under management, which dipped to 10.2% in 2012.

The global financial crisis of 2008-09 was primarily a banking crisis, explains the paper, which is why many thought the asset management sector would benefit in filling the space as safe havens. The research shows, however, that although the sector did outperform most global benchmarks, it did not grow as much as expected. Its growth was largely in line with rising equity valuations, says the paper, adding that only recently it exceeded its pre-crisis peak.

Study co-author Professor Wojcik said: ‘After the financial crisis, the West introduced ever-heavier regulations, and many thought that firms would move their business eastward to Asia where financial regulation was still emerging and was considered a much “lighter touch”. The market share did not expand in Asia as strongly as predicted, which suggests the region’s position is still tenuous in the global asset management hierarchy. We have also tracked how higher rankings seem to be influenced by the management of European pension industries. Companies in countries with compulsory pensions are likely to have large pools of assets to manage. It is therefore no accident that France and Germany have world-leading asset management sectors.’

Co-author Duncan MacDonald-Korth said: ‘Factors affecting the institutional and geographic structure of the industry include the direction of investment following the global financial crisis and the Eurozone crisis. Dollar- denominated assets, such as US Treasury bonds, and the dollar itself became safe havens for investments seeking to place capital. The strong forces which compelled investors to look for dollar assets also gave American firms an advantage over firms based elsewhere in the world during this period.’

One of the biggest losers after the financial crisis was Switzerland-based UBS. According to the paper, in 2006, it was ranked third in the world with 8.9% total global assets held, a total of $2.45 trillion under management. However, by 2012, UBS had dropped out of the top 10 firms with a holding of only 4.3%. By contrast, US firms performed ‘disproportionately well’ during the sample period, with two new firms, JP Morgan Chase and Bank of New York Mellon, both entering the top 10 by 2012. Bank of New York Mellon saw its assets increase hugely, up 629% to $1.385 trillion, though this was largely due to Bank of New York’s merger with Mellon Financial Corporation, says the paper.

In 2006, New York and London were the top cities for asset management, with the former holding a global market share of 12.7% and the latter 9.6%. However, by 2012, this had changed dramatically. New York’s share had surged to 17.7% of global assets under management, while London had fallen to fourth place with market share of just 6.8%.

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Notes for Editors:

  • The working paper, ‘Command Centres of the Asset Management Industry’, by Duncan MacDonald-Korth and Professor Dariusz Wojcik will be presented at the Fourth Global Conference on Economic Geography to be held in Oxford on 19-23 August, 2015.
  • The researchers analysed data provided by Towers Watson, a financial consultancy which releases data outlining the top 500 global asset management firms from 2006 to 2012 (apart from 2008 when no report was produced). They combined this with interviews carried out with industry professionals, as well as data from journalistic publications. Assets under management refers to the total market value of investments managed by a mutual fund, money management firm, hedge fund, portfolio manager, or other financial services, on behalf of its investors. Pension funds make up a large part of the total assets managed.
    The University’s School of Geography and the Environment, and The Smith School of Enterprise and the Environment, is staging what is thought to be the world’s biggest conference on economic geography. Nearly 700 delegates from over 50 countries are presenting 500 research papers on the changes that are taking place or that need to take place to ensure a stable, equitable and sustainable global economy. See the conference website at http://www.gceg2015.org/
  • The objective of the Conference is to foster interdisciplinary worldwide dialogue on the state of the art and the future agenda of economic geography. Its title ‘Mapping Economies in Transformation’ is based on the premise that while the world economy has been recently experiencing major shocks and shifts, it needs transformative change to address the challenges of unstable, unequal, and unsustainable development. South to South economic relations have become one of the engines of the global economy. Regulatory reforms in the wake of the global financial crisis are redefining the relationships between state and markets. It builds on the success of previous global conferences held in Singapore (2000), Beijing (2007) and Seoul (2011).