Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Despite authorities taking their foot off the environmental, social and governance pedal and recent volatility in equities and bonds, the benefits of Artificial Intelligence and improved investor transparency are just beginning.
Alternatives outstrip the rest for demand growth
Alternative investments will continue to represent the fastest-growing segment of the asset management industry worldwide, according to a report by McKinsey & Co published last week.
The report, based on a survey of 300 institutional investors, expects alternatives to provide 40 per cent of the industry’s revenue but this will be generated from only 15 per cent of its managed assets by 2020. Alternatives currently generate 30 per cent of the industry’s revenue, McKinsey estimates.
The report, titled “The Trillion Dollar Convergence: Capturing the Next Wave of Growth in Alternative Investments”, noted the boom in liquid retail alternatives products in the US was helping to drive the total numbers. In the US, alternatives are expected to account for up to 50 per cent of net new retail managed funds revenue within the next five years.
The report said: “Global assets in alternatives hit a record high of US$7.2 trillion in 2013 and currently generate nearly 30 percent of the asset management industry’s revenues… Retail alternatives, including mutual funds, closed-end funds and exchange-traded fund formats, have about US$2 trillion in assets globally, with US retail alternatives accounting for nearly US$900 billion of that sum.”
The alternatives market is expected to grow by 5 per cent a year over the next five years, compared with 1-2 per cent growth for the asset management market overall.
