The US asset management industry

Overview:

The US asset management industry is the largest in the world, with assets under management totaling $51.9 trillion as of Q3 2022.
The industry is highly concentrated and competitive, with the top 10 firms accounting for nearly 60% of the market share.

Distribution:

The distribution of financial products in the US mainly occurs through financial advisors and brokers.
Many asset managers distribute their products through major institutions such as Morgan Stanley and Merrill Lynch, as well as smaller, independent broker-dealers.
There has also been an increase in direct-to-consumer channels, as investors have become more comfortable with digital platforms.

Trends:

The US asset management space is currently dominated by highly politicised discourse on ESG and sustainability, which is explored in greater detail in ‘EU vs. US attitudes to ESG’.
Passive investment strategies are on the rise, with investors increasingly opting for low-cost index funds and ETFs rather than actively managed funds.
Technological advances are also reshaping the industry rapidly and unpredictably, with machine learning and AI increasingly playing a part in investment decisions. Some asset managers make use of digital models to make investment decisions, in addition to or instead of human fund managers.

Challenges:

As passive investing continues to grow in popularity, investors are increasingly unwilling to pay high fees for actively managed funds. This has led to intensified competition over fees among active asset managers, with many firms cutting fees in order to remain competitive.
Regulatory uncertainty. The Securities and Exchange Commission (SEC) has been working to modernise its regulatory framework, but it remains to be seen how these changes will impact the industry.
While they are creating new opportunities, technological advancements have also posed new challenges to asset managers, such as cybersecurity threats and the need to adapt to new digital platforms.