For chief investment officers, keeping up with asset management industry trends is like navigating a fast-moving river—staying aware of the currents is vital to steering their portfolio in the right direction.
Yet it’s easy to miss these key shifts and get swept off course in an industry that never stands still. It takes time and energy to stay up-to-date, commodities that most Chief Investment Officers would love more of.
What better way to stay informed, then, than by looking at a snapshot of the key trends shaping the investment management sector as we approach 2025?
Below are seven current asset management industry trends every investment professional should be aware of, according to experts from the IMF, Deloitte, PwC, and Morgan Stanley.
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The 7 asset management industry trends that experts are talking about right now
Investment officers seeking to keep track of a fast-moving sector have a lot on their plate, so it helps to focus on the most important happenings.
Here are the seven top key asset management industry trends of 2024 so far.
1. Higher demand for sustainability disclosure
The stakes are higher than ever for fund managers dealing with Environmental, Social, and Governance (ESG) disclosure.
For stakeholders, including investors, employees, and especially regulators—trust has become the cornerstone of business success. One misstep in reporting can severely damage a firm’s perceived reliability and undermine relationships key to long-term growth.
The latest data from PwC shows how seriously asset management companies around the world, including Europe and Asia, are taking it.
ESG transparency is the top priority in meeting employee expectations, scoring even higher than upskilling. Diversity, equity, and inclusion (DEI) demands also rank highly.
As regulatory scrutiny increases and new rules loom, treating trustworthiness as a central element of value creation is no longer optional; it’s essential. Firms will be scrutinised on the accuracy and completeness of the information they provide, and any discrepancies could alienate key stakeholders.
However, the recent anti-ESG backlash and concerns over the performance of ESG products have caused a sizeable shift in how asset managers approach sustainability.
Firms are splitting into two camps: the first focuses on integrating ESG factors broadly into existing mandates, including customized options like direct indexing. The second camp is focused on tangible impact, including thematic investing and funds that clearly define and track outcomes.
This latter approach has seen increased demand, with climate-specific funds attracting an impressive 19% net flows compared to just 2% for all ESG funds over the past year, according to Oliver Wyman.
Trust is paramount now more than ever, to the point that firms with embedded sustainability practices will not only keep stakeholders on their side but resonate with new investors and increase their market share.
2. AI platforms now have a firm grip on the industry
The AI warning alarm sounded by PwC in 2023, namely that one in six asset and wealth management companies would be left behind within five years, is blaring louder than ever.
Artificial Intelligence and machine learning now have a firm grip on the investment management industry, to the point that the latest Deloitte’s 2025 Investment Management Outlook hails it as the most disruptive force within the industry.
More specifically, in-house AI platforms that give portfolio recommendations tailored to individual customer risk management are leading the way: Amundi, BlackRock, Wealthfront, and Vanguard are among the top asset managers in the world offering these to help clients with decision-making.
“Investment businesses are using and investigating AI’s potential across various business lines”, says Jeff Kearns, in his recent article for the IMF. “Amundi, with €2 trillion ($2.1 trillion) under management, uses AI-based tools to customize portfolios for some of its more than 100 million clients by asking their preferences about risk. Responses help shape portfolios and provide a real-time sentiment gauge.”
The report has also found that investing in technologies that integrate AI into sales and distribution processes is expected to be among the most successful investment strategies for firms.
Invesco and WisdomTree are using generative AI and automation to craft targeted marketing strategies and business models for their clients. 60% of surveyed investment management firms currently use AI in their data-related sales and distribution (S&D) efforts, and the number of applications is set to rise, according to Deloitte’s global survey.
It’s looking increasingly likely that firms that fail to integrate AI into their S&D practices in 2025 will fall by the wayside, as moderate and heavy usage become more common across the industry.
3. Direct indexing and SMAs are two key emerging capital markets
Direct indexing solutions and separately managed accounts (SMAs) are the two hottest emerging capital markets, projected to reach $825 billion and $2.5 trillion in assets under management (AUM) by 2026, according to Deloitte.
A recent survey from Broadridge, a US public corporate services company, found that 89% of US and Canadian portfolio management executives are either currently offering direct indexing services or plan to within the next two years. 84% of industry leaders offer direct indexing, followed by 68% of mid-sized firms, and just under half of small firms. This trend is likely to resonate across the world.
Direct indexing and SMAs give investors more control over their investments, letting them choose what to invest in based on their goals. This could be bad news for traditional investment managers, who will need to adapt to use these tools. Investments are likely to be cheaper, forcing traditional firms to find ways to differentiate themselves.
For Chief Investment Officers (CIOs), the rise of direct indexing and SMAs means adapting to new client expectations and regulatory frameworks. CIOs must navigate the operational challenges these platforms introduce, such as managing data accuracy and integrating alternative data sources to maintain a competitive edge.
The ongoing trend of mergers and acquisitions within the industry—such as Morgan Stanley’s acquisition of Parametric—highlights this need for firms to enhance their SMA capabilities and broaden their financial service offerings.
4. Health tech & biotechnology looks set for sustained recovery
A rebound in mergers and acquisitions, an AI-fueled increase in productivity, and biotechnology were listed as the top drivers behind a health tech industry recovery at this year’s Morgan Stanley Global Healthcare Conference.
Lower interest rates and a reduction in capital costs are fueling more healthcare M&A deals and initial public offerings (IPOs), say experts. Healthcare even accounted for 20% of total IPO volume in 2024, with strong activity in therapeutics, diagnostics, and medical technology (MedTech).
In pharma and biotech, AI is being used for drug discovery initiatives, compound screening, dosage optimization, and supply chain management. Healthcare service providers are also using AI to cut expenses, streamline operations, and improve resource allocation, addressing issues like labor shortages and physician burnout.
The conference also highlighted numerous innovations, such as non-invasive cell-free DNA testing and diagnostic tools advancements that can detect diseases earlier than traditional methods. Companies are focused on developing these new technologies that enhance patient care and improve healthcare outcomes.
This positive news is contributing to revenue growth for healthcare providers and pharmaceutical companies, particularly in the U.S. market. Capital raised among US and European companies is on track to eclipse any pre-pandemic year, according to EY data, as the healthcare industry shakes off a turbulent 2022-2023.
5. Actively managed ETFs are on the rise
Exchange-traded funds (ETFs) have experienced explosive growth in recent years, with total asset classes skyrocketing from $992 billion at the end of 2010 to $8.1 trillion by the end of 2023. Much of this is down to the falling expense ratios of ETFs, which are lower than traditional mutual funds.
Actively managed ETFs are gaining traction, capturing 25% of total ETF net inflows across the world, up from just 9% five years ago. This growth suggests a strong appetite among investors for low-cost funds, indicating that the current low-expense ratio environment may persist.
The rise of index portfolios may be another driver of this trend since active managers can predict the investment behaviors of passive managers. It may mean passive investment has reached its peak (with an increase in outflows on the horizon) as active management is now accessible through the investor-friendly low-cost ETF structure.
The ETF market's expansion reflects a shift toward more efficient and accessible investment products, as investors continue to prioritize cost savings and simplicity in their portfolios.
6. Growth of private credit and interest rate cuts set to benefit alternative asset managers
The growth of private credit markets is nothing new. They have been steadily expanding across world economies this millennium, especially in North America, to the point that total value topped $2 trillion in 2023, according to the IMF.
There’s little evidence to suggest that growth will slow down anytime soon, either, particularly with expected interest rate cuts from the US Federal Reserve, the Bank of England, and the ECB.
As such, many investment management firms are actively seeking partnerships with banks that previously seemed hesitant to enter private markets.
Collaborations like those between Wells Fargo and Centerbridge Partners, as well as Barclays and AGL Credit Management, are reshaping these relationships for mutual benefit.
Investment managers are involved in this benefit as they gain exclusive access to the banks' deal flows, while the banks receive additional private equity for their clients through these partnerships.
As we head into 2025, these partnerships are expected to significantly contribute to the growth of private credit AUM, particularly as new entrants work to build fundraising momentum from the beginning. Broadening the product lineup to include alternative investments like private credit and evergreen or hybrid fund structures looks like it will be a key revenue booster for firms.
7. Infrastructure investments are showing signs of recovery
The convergence of AI demands and clean energy is one of the key trends in the asset management industry and represents a dual opportunity for investment firms in the infrastructure sector.
As the digital transformation continues to escalate, especially with the rise of Generative AI, the need for robust data centers and sustainable power sources is paramount.
The 2024 CBRE Investment Management report shows how the infrastructure buildout for AI is happening at an unprecedented pace, creating huge opportunities for investment in clean energy and grid infrastructure.
This is a contributing factor to infrastructure fundraising eclipsing $40 billion in the first half of 2024, over double that of the same period in the previous year. High-net-worth investors seeking liquidity alongside robust investment opportunities are building hybrid portfolios combining listed and private infrastructure.
Savvy investment firms could take advantage of the underallocation gap that remains, despite this surge in funding.
Asset management industry trends in 2024: A recap
As we approach 2025, Chief Investment Officers must be ready for an asset management industry in the thrall of market shifts and changing investor preferences that will test their operational efficiency and decision-making.
The surge in AI use and high demand for ESG transparency make up the bulk of these as the financial world grapples with the volatility that artificial intelligence and climate change bring.
Simultaneously, direct indexing and separately managed accounts (SMAs) are reshaping investment decisions, providing investors with greater control and customization.
Chief Investment Officers, too, must deal with the drive toward alternative investment vehicles that the resurgence in private credit and infrastructure funding brings, and keeping pace with this will be crucial to short-to-medium-term success.
Those who can shape their strategies to best weather these key trends will be the ones who prosper.
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