McKinsey sees money manager war brewing as $10T comes into play

A major battle is being waged among money managers over as much as $10 trillion coming to the US market over the next decade from banks, insurers and wealthy retail clients, with firms needing to win the funds to bail out “leaky boats”of flatlining revenues and falling profits.

That’s according to a McKinsey & Co. analysis published Wednesday of the challenges facing asset management, which is beset by investors yanking billions of dollars from higher-fee active funds amid persistently high industry costs. The opportunity lies in an estimated $8 trillion to $10 trillion in new US assets, a potential 15% increase in the total market up for grabs in North America, according to the analysis.

Asset managers worldwide collectively managed a record $132 trillion in June, an 8% jump from 2023 and a 21% increase from the prior year, according to the report. But the bulk of the new money went into lower-priced products, with higher-fee strategies either shrinking or stagnating. 

“Outsize growth requires looking beyond the zero-sum game of share gain in a static market to find new pools of assets that can increase the size of the industry’s pie,” the consultants wrote. The industry is now “equal parts a place of intense competition with challenged product segments and a market that’s ripe with promise and plenty, particularly in seizing opportunities beyond the balance sheet.”

Money managers stand to gain $5 trillion to $6 trillion of private credit and debt business from big banks pulling back lending over the next decade. Another $2 trillion to $2.5 trillion could come from the convergence of insurance and private capital, while money managers are making inroads in a $1 trillion to $1.5 trillion market investing individual wealth in private assets.