Despite facing myriad challenges over the past year, many linked to the ongoing coronavirus pandemic, the global asset management industry has experienced continued growth, according to Cerulli Associates’ latest report, Global Markets 2021: Continued Growth in Uncertain Times. Asset managers around the world are adapting their approaches and outlook to remain competitive. Many are devoting resources to product innovation and to finding ways to improve operational efficiencies through better use of technology. Cerulli’s research shows that global assets under management (AUM) grew by 10.3% year-on-year in 2019 and by 4.1% in 2020. In addition, the global analytics and consulting firm forecasts year-on-year growth of 5.8% in 2021.

“COVID-19 has had less of an impact on the global asset management industry than many expected at the start of the pandemic,” says André Schnurrenberger, managing director, Europe at Cerulli Associates. “Assuming that the coronavirus outbreak is brought under control, we expect AUM in the U.S. to continue growing; we also expect non-U.S. assets to keep increasing over the next five years, with a growing middle class and improved financial literacy fueling demand in developing markets.”

The coronavirus pandemic has encouraged saving, and more individuals, especially younger people, have shown interest in investing over the past year. For example, the client base of Hargreaves Lansdown, the U.K.’s largest direct-to-consumer platform, stood at 1.5 million in February 2021, up 84,000 from June 2020. Cerulli believes that asset managers have an opportunity to capitalize on this growing interest by offering attractive product ranges while simultaneously educating people on the benefits of long-term investing.

In terms of asset classes, many investors believe that emerging markets, particularly in Asia, are making better progress in their economic recovery from COVID-19. As a result, investors are eager to increase their exposure to such markets. In addition, value-driven products tied to real-world issues such as climate change and digitization have seen their popularity accelerated by the coronavirus pandemic. Managers around the world should seek to offer products that meet this demand.

Fee pressure generally remains a challenge for asset managers operating in the markets covered by Cerulli’s research. In the U.S., for example, managers continue to face fee compression because investors now have several ways to access lower-cost products—through a change in provider, new share classes, or exposure to strategies through different vehicles. Managers face high buyer power, low supplier power, strong existing competition, high threat of substitution, and high threat of new entry. Many are responding by offering niche services and products—those with specialist expertise in popular areas can not only ease fee pressure, but may be able to charge premium prices.

“Overall, the global asset management industry’s 2020 was much better than anticipated and, provided COVID-19 is brought under control, the outlook for the sector is generally positive,” adds Schnurrenberger. “We expect managers that emphasize the quality of their products and focus on meeting their clients’ needs to be best placed to succeed over the coming years.”