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Bull markets good, bear markets great in global insto funds game

Vanguard usurped BlackRock as the biggest institutional fund manager in 2022 during a year where most firms went backwards, according to the latest Pensions & Investments global survey.

The Pensions & Investments (P&I) data shows Vanguard took the number one spot with just above US$5 trillion under management despite seeing assets slide by more than seven per cent over the 2022 calendar year.

But the BlackRock institutional book shrunk even more during the same period, falling by 15 per cent plus to end with about US$4.8 trillion compared to almost US$5.7 trillion as at December 31, 2021. In fact, of the top 20 largest managers only Goldman Sachs (5.9 per cent) and Franklin Templeton (32 per cent) came through 2022 in the black – the latter only by dint of several acquisitions last year.

BNY Mellon, Legal & General and Northern Trust Asset Management reported the biggest year-on-year decrease in funds under management (FUM) with all three down about a quarter on their respective 2021 figures.

Across the entire P&I list of 434 institutional firms, total assets under management fell more than 12 per cent during the 12-month period to about US$50.4 trillion (US$57.5 trillion in 2021). Annual percentage changes in FUM ranged from an almost 100 per cent gain for US retirement specialist, Empower, to reach US$158.5 billion to year-on-year declines of 70 per cent plus for minnows Gateway Investment and Jackson Square Partners.

As expected, most of the big proportional swings in asset size occurred at the smaller end of town (although Empower rose from 102 to 61 on the list in 2022): of the largish managers, the UK-based growth firm, Baillie Gifford, fared the worst after shedding about US$150 billion (-40 per cent) and dropping from 51 to 37 in the P&I rankings. Cryptocurrency specialist fund, Grayscale, also had a torrid year after FUM collapsed 66 per cent to US$11.7 billion from US$34.8 billion in 2021.

Boasting about US$400 billion under management, Macquarie ranks as the highest (30) of the Australian contingent, which also includes the almost US$142 billion IFM Investors (65) and First Sentier Investors (placed 95th with US$78 billion). No NZ managers made the P&I list with perhaps only the Wellington-headquartered Morrison & Co a contender anyway.

However, other top-tier managers familiar in Australasia include: the 13th placed PIMCO (US$865 billion); T Rowe Price at 17 (US$737 billion); the US$584 billion Dimensional (22); Mercer (US$338 billion, ranked 35); and Russell Investments landing at 49th with over US$227 billion.

Eric Balchunas, Bloomberg Intelligence senior analyst, told P&I that Vanguard bested BlackRock last year due to the ongoing surge in passive investing and the market slump in 2022.

“Bull markets are good for Vanguard, but bear markets are great,” Balchunas said, adding that regulators may ultimately step in to limit the proportion of listed companies that funds can own given the outsize influence of Vanguard and BlackRock, in particular, in global share registers.

“They’ll be going after one another,” Balchunas said, “until the government goes after them.”

This article originally appeared on Investment News NZ.

David Chaplin

  • David Chaplin is a reputed financial services journalist and publisher of Investment News NZ.

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