Money manager assets to surpass $100 trillion by 2020: PwC

Regulations to lessen riskier assets on banks’ balance sheets, including industry stress tests in Europe, would also see cash diverted to the funds sector, consultancy PwC said.

“This will create a vacuum into which asset management will step,” leading to the creation of a new breed of global “mega-managers,” the report said.

Investment managers would increase assets by 6 percent annually from almost $64 trillion, driven by asset growth at pension funds, sovereign wealth funds and among high-net-worth customers, it said.

Although the asset pool will remain concentrated in the United States and Europe, the surge in middle-class and high-net-worth individuals in Asia will push the region’s share to 16.2 percent in 2020 from 7.7 percent in 2012.

Pension funds will account for most asset growth, rising 6.6 percent a year to hit $56.5 trillion by 2020. Sovereign wealth funds were set to grow by almost 80 percent to reach $9 trillion in 2020, mainly driven by the Middle East and Africa.

However, that growth would attract even greater attention, including tougher measures against tax avoidance and money-laundering, from regulators trying to protect investors by improving transparency and public trust in the sector.

Regulators will also try to lower the costs of investing, and PwC forecast the rise of models similar to Britain’s 2013 Retail Distribution Review, which sought to make transparent the fee structure charged by funds and advisers.

That should fuel demand by clients for lower-cost products such as exchange-traded funds (ETFs), as championed by providers Vanguard and BlackRock, and see that asset class reach 22.7 trillion dollars by 2020, the report said.

Clients will also want more longer-term investments, such as private equity and infrastructure, PwC said, with a growing number of retirees looking to wealth managers to help them transfer assets to the next generation.

Freya Berry is a reporter for sister news service Reuters