Global asset management assets expected to reach US$80 trillion
The latest report released by the Boston Consulting Group shows that the scale of assets managed by the global asset management industry on the eve of the financial crisis reached US$48.2 trillion. The compound annual growth rate in the years before the crisis was 12%, and the growth rate was between 2007 and 2016. It dropped to 4% during the period, but it has now returned to the pre-crisis speed. It is estimated that the assets under management of the global asset management industry are expected to reach US$80 trillion this year.
According to the report, for asset management companies, the fastest-growing market is China, where assets increased by 22% from 2016 to 2017 to US$4.2 trillion. Management companies such as Vanguard, Invesco, Marshall Wace and Axa Investment Managers have all established wholly foreign-owned enterprises in China.
According to the report, Latin America is another fast-growing asset management market, with assets increasing by 17% over the same period to US$1.8 trillion. The United States market has grown by 13%, but in absolute terms, it is still the world's largest asset management market by far, with total assets reaching 37.4 trillion US dollars, even far exceeding Europe.
The European market has the lowest growth rate, only 7%, and its asset management assets have increased to US$22.2 trillion. Japan (Japan) and Australia (Australia) rank in the middle for market growth, with total assets increasing by 10% from 2016 to 2017 to US$6.2 trillion.
2018 performance growth pressure is particularly prominent
Philip Koch, McKinsey's European Asset Management Business Director, said that 2017 was an unprecedented year for the asset management industry. He said that the substantial increase in the performance of asset management companies in 2017 mainly came from a good market environment. Once the market fluctuates or adjusts, the pressure on performance growth in 2018 will be particularly prominent.
The total asset management of the 300 fund companies surveyed by McKinsey reached 76 trillion euros in 2017, an increase of 11.8%, but the growth was mainly driven by the market, not from new inflows of investors. Although Wall Street made good returns in 2017, retail investors are reluctant to invest their savings in the market. The new capital inflows in the market are therefore not particularly large, and remain at the level of 1.8 trillion euros.
The current situation is not so optimistic
The tailwind brought about by rising asset prices has reduced the pressure on the profitability of asset management companies. The ratio of the operating margin of asset management companies to total asset management has also increased from 9.5 basis points in 2009 to the current 15 basis points.
However, regulatory changes and cost pressures brought about by technology investment still plague asset management companies. The asset management companies surveyed by McKinsey & Company increased by 9% in 2017 and a total increase of 78% compared to 2008. Koch said that the operating costs of asset management companies continue to grow rapidly, far faster than the current profit growth rate, so many asset management companies are not too optimistic about the current situation.
The M&A market will remain active in the second half of the year
Anu Aiyengar, head of North American M&A at JPMorgan Chase, pointed out on July 25, 2018 that the amount of funds available for M&A transactions is currently at an unprecedentedly high level. Since the beginning of this year, the global M&A market has maintained a strong momentum, and large-scale transactions have performed particularly well.
Since the beginning of the year, the global M&A transaction volume has reached 2.3 trillion US dollars, of which the number of transactions with a value of no less than 250 million US dollars has increased by 13% year-on-year; the global large-scale M&A transactions have exceeded 30, an increase of 182% year-on-year. The main driving forces that have driven the M&A market in the past few years have continued to be effective, including synchronized global economic growth, extremely favorable stock market valuations, extremely low debt costs, and investor support for mergers and acquisitions.
She pointed out that for the global M&A market, the most important emerging driver is the United States Tax Reform Act. The S&P 500 index component companies have approximately US$1 trillion in cash and US$1.5 trillion in overseas retained earnings and profits overseas.
Consumption patterns are changing
If all of these cash flows back to the United States, some of the funds are expected to flow to the M&A market. Geopolitical uncertainty is the biggest unfavorable factor facing M&A activities in 2018. However, driven by strong driving forces, it is expected that the prosperity and activity of the global M&A market will continue in the second half of 2018.
In addition, Anu Aiyengar also said that the demands of innovation, disruptive technology and development are redefining industries, regions and enterprises. Consumption patterns are changing, and consumer participation patterns are also changing. Companies in various industries are making drastic use of mergers and acquisitions to redefine or divide the industry landscape, such as AT&T's acquisition of Time Warner, Amazon's acquisition of Whole Foods, Wal-Mart's acquisition of Flipkart, and CVS's acquisition of Antai Insurance. Despite frequent global trade frictions, M&A transactions in the first half of 2018 are still in full swing. Although China's M&A transaction volume has reached a record low, M&A transactions in the energy industry outside the United States are still hot.
The perfect storm in the M&A market
Data tracked by Thomson Reuters since 1980 showed that global M&A transactions reached US$2.5 trillion in the first half of this year, a record high over the same period and a year-on-year increase of 65%.
The chart produced by the United Kingdom's Financial Times statistics shows that there were 79 mergers and acquisitions with a transaction value of more than US$5 billion in the first half of the year, setting a new record for the same period set in 2007. There were 35 mergers and acquisitions with a transaction value of more than US$10 billion. The number of pens has also reached a new high. The New York Times pointed out that the combined transaction value of more than 5 billion US dollars accounted for more than half of the total global M&A transactions in the first half of 2018, which is also a record level. Among these 35 mergers and acquisitions, the transaction value was more than 10 billion US dollars.
Colm Donlon, Morgan Stanley's head of mergers and acquisitions in the Europe, Middle East and Africa market, said that record mergers and acquisitions have a series of reasons, including the market's focus on the integration of the European corporate world, and Chinese and Japanese companies once again locked their merger targets in Europe. He said: "This is almost a perfect storm in the M&A market. We have never been so busy."