Asset management industry forecast to reach $200 trillion by 2030 amid private market growth and UK pension investment tensions

The global asset management industry is poised for remarkable growth, with assets under management (AuM) projected to reach $200 trillion by 2030, according to a recent report by consultancy PwC. This forecast, built on insights from 300 asset managers, institutional investors, and distributors worldwide, highlights private markets as a critical driver, expected to generate more than half of the industry’s revenues, reaching approximately $432 billion within five years.

PwC’s analysis reveals that the global fund management sector is set to expand by over $60 trillion from $139 trillion in 2024, assuming a continued decline in global inflation and interest rates. These economic conditions are anticipated to encourage a shift from cash savings to investment vehicles, further fueling industry growth. However, despite the optimistic asset growth outlook, profitability within asset management faces ongoing pressure due to increased competition, fee compression, and rising operational costs. The report found that 89 percent of asset managers have experienced profitability challenges over the past five years, with profit margins relative to assets under management falling by 19 percent since 2018 and forecasted to decline a further 9 percent by 2030.

Albertha Charles, PwC UK’s global asset and wealth management leader, underscored that while private markets anchor growth potentials, the benefits will not be universally shared. Success will favour firms able to reinvent business models and clarify where they offer distinctive value.

Domestically, the UK’s asset management landscape shows contrasting dynamics, especially in pension fund allocations. The Financial Conduct Authority’s (FCA) defined benefit pension scheme, with assets of £556.9 million, allocates only 4 percent of its equity portfolio to UK stocks. This is markedly below the average 25 percent allocation seen in private sector defined benefit funds, which are themselves emphasizing a greater UK stock presence following governmental and regulatory calls to support domestic markets.

This disparity has drawn criticism. Charles Hall, head of research at Peel Hunt, described it as “a clear example of do as I say rather than I do.” The FCA’s defined contribution scheme similarly holds a meagre 3 percent allocation in UK equities, underrepresenting the UK stock market’s approximate 3.5 percent share of global equities. The FCA stated that the pension plan trustees operate independently and are focussed on maximising returns while managing investment risk appropriately.

The issue of encouraging pension funds to invest more substantially in UK assets has proven contentious. Earlier in November, over 100 UK business executives, backed by the London Stock Exchange Group, proposed that defined contribution pension schemes be mandated to allocate at least 25 percent of their assets to UK investments. They argue this is necessary to reverse the decline in domestic stock market support and foster economic growth. However, many in the pensions industry have pushed back, cautioning that such mandates could jeopardize returns and potentially harm savers’ interests.

Amid these asset management trends, the UK economy exhibits signs of fragility ahead of Chancellor Rachel Reeves’ upcoming Budget. Public sector borrowing in October overshot expectations, reaching £17.4 billion compared to the £15 billion forecast, contributing to a cumulative borrowing of £116.8 billion for the fiscal year-to-date. Retail sales also fell sharply by 1.1 percent in October, worse than anticipated, while consumer confidence dipped and private sector growth stalled. Economic commentators warn that proposed tax increases in the Budget may further dampen retail spending during the critical festive season and into 2025.

In summary, the asset management industry faces a dynamic future marked by expansive growth, particularly in private markets and technological innovation such as tokenised funds and passive investment strategies. Yet, profitability pressures and regulatory dynamics around domestic investment present ongoing challenges. Meanwhile, broader economic headwinds in the UK highlight the complex environment in which asset managers and pension funds must operate, balancing growth ambitions with market realities and policy frameworks.