Global dominance of US asset managers rising, says new study

New York has dominated growth in the asset management sector since the crisis of 2008-09, taking an even more commanding lead over rivals, says a working paper by Oxford University researchers.

The researchers found that by 2012, the US held 48.7 per cent of all global assets under management, with the UK at 8.1 per cent, Germany, France, Japan at around 7 per cent, and Switzerland trailing in sixth place at 4.3 per cent.

The top ranked asset manager was New York-based BlackRock, which in 2012 held 55 per cent more assets than its next competitor while two other US firms – State Street and Vanguard – were also in the top four firms globally for asset management, says the paper.

The researchers Duncan MacDonald-Korth and Professor Dariusz Wojcik will present the paper at the world's biggest ever economic geography conference, hosted by the University's School of Geography and the Environment and the Smith School of Enterprise and the Environment.

The paper investigates the impact of the global financial crisis on the asset management industry.

The crisis has resulted in a wealth of new regulation in the West which many had predicted would lead to an exodus of business towards Asia.

Yet, the paper shows that Asian financial centres did not do as well as many had expected. By the end of 2011, the Asia-Pacific region held 11.4 per cent of total assets under management, which dipped to 10.2 per cent in 2012.

The global financial crisis of 2008-09 was primarily a banking crisis, explains the paper, which is why many thought the asset management sector would benefit in filling the space as safe havens.

The research shows, however, that although the sector did outperform most global benchmarks, it did not grow as much as expected. Its growth was largely in line with rising equity valuations, says the paper, adding that only recently it exceeded its pre-crisis peak.

Study co-author Professor Wojcik says, "After the financial crisis, the West introduced ever-heavier regulations, and many thought that firms would move their business eastward to Asia where financial regulation was still emerging and was considered a much ''lighter touch''.

The market share did not expand in Asia as strongly as predicted, which suggests the region's position is still tenuous in the global asset management hierarchy. We have also tracked how higher rankings seem to be influenced by the management of European pension industries.

Companies in countries with compulsory pensions are likely to have large pools of assets to manage. It is therefore no accident that France and Germany have world-leading asset management sectors.'

Co-author Duncan MacDonald-Korth says, "Factors affecting the institutional and geographic structure of the industry include the direction of investment following the global financial crisis and the Eurozone crisis.

Dollar-denominated assets, such as US Treasury bonds, and the dollar itself became safe havens for investments seeking to place capital. The strong forces which compelled investors to look for dollar assets also gave American firms an advantage over firms based elsewhere in the world during this period.'

One of the biggest losers after the financial crisis was Switzerland-based UBS. According to the paper, in 2006, it was ranked third in the world with 8.9 per cent total global assets held, a total of $2.45 trillion under management.

However, by 2012, UBS had dropped out of the top 10 firms with a holding of only 4.3 per cent. By contrast, US firms performed 'disproportionately well' during the sample period, with two new firms, JP Morgan Chase and Bank of New York Mellon, both entering the top 10 by 2012.

Bank of New York Mellon saw its assets increase hugely, up 629 per cent to $1.385 trillion, though this was largely due to Bank of New York's merger with Mellon Financial Corporation, says the paper.

In 2006, New York and London were the top cities for asset management, with the former holding a global market share of 12.7 per cent and the latter 9.6 per cent.

However, by 2012, this had changed dramatically. New York's share had surged to 17.7 per cent of global assets under management, while London had fallen to fourth place with market share of just 6.8 per cent.

Researchers examining the resilience of the world's financial centres after the global economic crisis, say in a  new paper that British banks engaged in more offshore banking than any other financial centre. (See: British banks' offshore banking activities 'the greatest threat to national solvency).