Last updated: 07:38 / Wednesday, 2 February 2022
A research by Cerulli

Total Professionally Managed Assets in the U.S. Grow by Nearly 11%

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  • The largest institutional client segments are insurance general accounts, corporate defined contribution (DC): 401(k) plans, and state and local government defined benefit (DB) plans
  • Growth of the retail segment of professionally managed assets has outpaced that of institutional over the subsequent decade, accounting for 49% of the total
  • Cerulli believes that asset managers should devote time and resources toward considering how they plan to address the retail segments

U.S professionally managed assets grew nearly 11% and boast an 8% 10-year compound annual growth rate, according to the latest research by Cerulli Associates.

While the majority of addressable assets reside in the institutional channel, retail client asset growth has outpaced that of institutional markets consistently over the last 10 years, says the document The State of U.S. Retail and Institutional Asset Management 2021: Targeting Growth Opportunities.  

The largest institutional client segments are insurance general accounts, corporate defined contribution (DC): 401(k) plans, and state and local government defined benefit (DB) plans. Collectively, these three channels represent more than 60% of the total institutional addressable market.

Cerulli points out that as institutional investors increasingly seek greater portfolio customization, enterprise risk management, and access to co-investment opportunities, they are growing their reliance on intermediaries—investment consultants, outsourced chief investment officers (OCIOs), or financial advisors—to select investment products and/or manage their portfolios. “Institutional investors demand more than returns and want an investment partner that exceed performance expectations and more,” remarks Brendan Powers, associate director of the firm.

The research also shows that growth of the retail segment of professionally managed assets has outpaced that of institutional over the subsequent decade, accounting for 49% of the total. As of year-end 2020, distribution through third parties, such as broker/dealers (B/Ds) and registered investment advisors (RIAs), account for 75% of total retail channel assets. The strongest channel growth occurred among hybrid RIAs (20%) and independent RIAs (16%).

In response to this evolving dynamic, Cerulli believes that asset managers should devote time and resources toward considering how they plan to address the retail segments. “From platform-level product placements to the introduction and adoption of asset allocation model portfolios, retail channels are increasingly demanding the levels of sophistication and dedicated service formerly reserved for institutional gatekeepers,” comments Powers.

While the fragmented nature of the retail channel will continue to pose challenges, the opportunities will outweigh the costs. “As commoditization and shrinking fees threaten many market competitors, managers will need to rethink their priorities as retail channels seem poised to account for the majority of client assets in the near future,” concludes Powers.

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