Vanguard delivered almost double the total net inflows for US fund managers in 2016, according to a new report from Boston Consulting Group.
US net inflows for the year were $140bn, but $276bn of those came from Vanguard meaning that without the passives giant total net flows would have been -$136bn, The Innovator’s Advantage report says.
Passives represented 10 of the top 15 US strategies by inflows. Of the 15 worst strategies by outflows, 11 were active equity or fixed income.
The annual survey shows global assets under management across the industry rose 7 per cent to $69.1trn, but this was largely due to appreciation in global markets. Net flows added just 1.5 per cent to AUM.
Revenues failed to keep up with AUM and instead fell in 2016 – the first time since the 2008 financial crisis. Profits also fell.
By 2021 BCG expects core active strategies, such as active equity and fixed income, to account for 29 per cent of AUM losing share to passives, solutions, specialties and alternatives. Today core active strategies account for 35 per cent of AUM, while passives account for 18 per cent.
However, passives only contribute 6 per cent to global net revenues despite their increasing share of the market.
In contrast, alternatives, such as absolute return, hedge funds and private equity, currently only account for 15 per cent of AUM but deliver 42 per cent of total revenues, the report notes.
The market continues to polarise between large players with passive or diversified holdings or niche players, while the middle is being squeezed, the report says.
“Players will need to become alpha shops, beta factories, solution providers, or distribution powerhouses,” the report says.
European market inflows were much less concentrated in passives, the BCG report says.
Blackrock, Nordea and Vanguard attracted the largest inflows in Europe with $23bn, $22bn and $17bn respectively. Aviva Investors was the only UK-headquartered asset manager to feature on the list for top-10 inflows with $12bn.
China’s growth stood out compared to other markets with AUM up 21 per cent driven by net new flows, which added 17 per cent.
Sterling weakness and subsequent rising markets buoyed UK asset managers, which saw assets rise 11 per cent despite 1 per cent falling AUM from outflows.
The survey was based on 153 asset managers representing $43trn.