Retail investors are rapidly narrowing a long-standing divide in US asset management, bringing the industry’s two biggest client segments to near-equal footing and forcing firms and advisors to rethink distribution strategies.
New research from Cerulli Associates shows professionally managed assets in the US reached $73.7 trillion at the end of 2024 with $36.6 trillion in retail channels, just shy of institutional channels at $37.1 trillion. It’s a level of parity that was rare before the pandemic-era surge in individual investor participation.
Retail briefly overtook institutional assets in 2020 and 2021 before retreating during the 2022 market correction. Now, momentum has returned. Cerulli’s data indicates retail channels are again gaining share as demographic and structural shifts funnel more assets into individual investor accounts.
“A significant drop in assets during the equity market correction of 2022 has led to retail client channel assets posting lower three- and five-year compound annual growth rate figures compared to institutional client channel assets,” said Brendan Powers, director at Cerulli. “A higher year-over-year growth rate in 2024 highlights a return to the long-term 10-year growth rate trends that have favored retail client channels. We expect this to continue as corporate DB plans pursue pension risk transfers and corporate DC plans continue to witness assets roll over into IRAs.”
Intermediaries are also gaining influence across both channels. Outsourced chief investment officer platforms now oversee $3.3 trillion in institutional assets, more than tripling their footprint in less than a decade. On the retail side, RIAs control $5.9 trillion in assets, bolstered by organic growth and sustained M&A activity that has concentrated assets among fewer, larger firms.
Asset managers seeking institutional mandates typically start with separate accounts but are expanding into additional vehicles.
“For managers seeking to distribute to institutional investors, the demand will typically start with institutional separate accounts but extend to private funds and/or mutual funds for smaller institutions or for asset classes that are operationally challenging for separate accounts,” Powers said.
Meanwhile, retail distribution is driving greater use of ETFs, SMAs and alternative investment wrappers.
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