Asset management outlook: Moving
beyond volatility
beyond volatility
Renée Friedman, PhD
Global Head of Research
EXANTE
Global Head of Research
EXANTE
Asset management outlook: Moving
beyond volatility
beyond volatility
Renée Friedman, PhD
Global Head of Research
EXANTE
Global Head of Research
EXANTE
Executive Summary
Global assets under management are projected to surge from $846.1 billion in 2025 to $9.6 trillion by 2035. This growth potential is set against a backdrop of severe macroeconomic, geopolitical, and technological disruption. Key risks and opportunities are defined by five overarching themes: macroeconomic and geopolitical volatility, accelerating AI adoption, regulatory fragmentation, consolidation pressure, and escalating technological and cyber risks. This report synthesises findings from leading industry research firms, international regulators, and global consultancies to provide a comprehensive picture of the key risks and opportunities facing asset managers globally.
Renée Friedman, PhD
Global Head of Research, EXANTE
Global assets under management are projected to surge from $846.1 billion in 2025 to $9.6 trillion by 2035. This growth potential is set against a backdrop of severe macroeconomic, geopolitical, and technological disruption. Key risks and opportunities are defined by five overarching themes: macroeconomic and geopolitical volatility, accelerating AI adoption, regulatory fragmentation, consolidation pressure, and escalating technological and cyber risks. This report synthesises findings from leading industry research firms, international regulators, and global consultancies to provide a comprehensive picture of the key risks and opportunities facing asset managers globally.
Renée Friedman, PhD
Global Head of Research, EXANTE
Key Findings
- Geopolitical disruptionThe US-Israeli-led war with Iran has caused the largest oil-supply shock in history by disrupting transit through the Strait of Hormuz, testing global equity, bond, and commodity markets. This event highlights permanent geopolitical realignments, weakened international coordination, and rising geoeconomic fragmentation.
- Structural business pressuresThe industry faces structural fee compression due to the rise of passive strategies and increasing compliance costs. Profitability per AUM is down significantly. Firms are responding by shifting focus from pure beta to specialised, high-conviction alpha, leveraging AI for personalisation, and transforming product lines from mutual funds to active ETFs.
- Consolidation
and private marketsIndustry consolidation is accelerating, particularly through capability-led M&A targeting private markets, real assets, and advanced technology to achieve scale. Private markets are expected to generate over half of the industry’s total revenue by 2030, producing significantly higher profit per $1 billion in assets than traditional managers. Mid-sized firms face the greatest margin pressure, prompting a need for greater specialisation or scale. - The AI imperativeAI is now a strategic focus, transforming front-office functions (e.g., market research, client risk profiling) and back-office compliance activities (e.g., fraud detection, sanctions evasion). While 45% of managers expect AI to create new revenue streams, productivity gains are often “trapped” in legacy processes, requiring investment in data governance and infrastructure to achieve measurable P&L impact.
- Cyber and operational riskAI is a dual-edged sword, serving as a defence enhancer while simultaneously acting as a threat amplifier, capable of supercharging complex cyberattacks, as demonstrated by models like Anthropic’s Mythos. Widespread use of similar systems creates systemic, correlated risk for the financial sector. Operational resilience is a strategic priority due to technology dependence and concentrated third-party risk.
- Regulatory dynamics
and digital assetsRegulatory environments are diverging, pushing up costs. Regulatory clarity in the US regarding digital assets is boosting confidence and accelerating the introduction of tokenised funds and blockchain-based settlement. Tokenised real-world assets are projected to exceed $100 billion in 2026. - ESG evolutionSustained demand from younger investors continues despite US political noise. Regulators are prioritising accurate, traceable data to combat greenwashing, with the focus shifting towards decarbonisation of high-emitting companies and leveraging AI to evaluate sustainability reporting.
Volatility rising: balancing market risks with opportunities
War upends the global macroeconomic environment
The macroeconomic backdrop heading into 2026 was characterised by competing forces: an expectation that interest rates globally would continue to normalise as inflation in most major economies, barring Japan, continued to fall, providing support to equity markets as bond markets steepened and the dollar continued to weaken. Earnings were expected to remain resilient and fiscal expansion was expected to support risk assets. Risks included persistent geopolitical tensions between Ukraine and Russia, tariff uncertainty, and uneven regional growth trajectories.
The US-Israeli-led war with Iran has, as noted by Dambiso Moyo, disrupted transit through the Strait of Hormuz, which accounts for approximately 20% of the world’s daily oil demand, creating the largest oil-supply shock in the history of the global oil market. This disruption has severely tested equity, bond, commodity and FX markets, forcing investors to reconsider the impact on inflation, the pace of monetary policy changes, supply chain interruptions, and currency exposures. GCC issuers, however, still have strong external balances, substantial foreign reserves and sizable sovereign wealth assets that provide an important cushion against volatility.
Geopolitical realignments
and breakdowns
and breakdowns
The war with Iran highlights a permanent change in geopolitical alignments, showing a real-time weakening of international coordination and declining effectiveness of multilateral institutions. The US may partially withdraw from NATO due to demands on its allies to participate in freeing the Strait of Hormuz. GCC countries, facing immediate existential threats, have been forced into closer alignment with the US and Israel, shifting away from their previous strategy of neutrality. The Middle East Council on Global Affairs has identified that the GCC’s challenge is to design a security posture that preserves autonomy while reducing exposure to both Iranian coercion and unwanted strategic entanglement. Given the difficulties in negotiating for needed technologies such as drones, the GCC states are now more likely to move towards building their own deterrence capabilities and aim for greater defence independence and accelerated indigenous defence industrialisation. We will also likely see, as noted by Yara Aziz, Senior Economist at OMFIF, greater co-operation on maritime security, energy infrastructure protection and trade logistics to improve resilience to future disruptions.
Geopolitical volatility is also increasing geoeconomic fragmentation, reshaping cross-border trade and investment flows and complicating global operational models. This has led to the emergence of what Deloitte has called “hybrid risks” that cut across financial, operational, technological, and geopolitical domains. As a result, some countries are reducing reliance on cross-border AI, data and technology stacks to strengthen supply chain resilience, which could complicate global firms’ efforts to maintain integrated resilience plans.
Geopolitical volatility is also increasing geoeconomic fragmentation, reshaping cross-border trade and investment flows and complicating global operational models. This has led to the emergence of what Deloitte has called “hybrid risks” that cut across financial, operational, technological, and geopolitical domains. As a result, some countries are reducing reliance on cross-border AI, data and technology stacks to strengthen supply chain resilience, which could complicate global firms’ efforts to maintain integrated resilience plans.
Overcoming structural pressures to achieve AUM growth
Scale matters
According to BCG, the global asset management industry reached a record $128 trillion in assets under management (AUM) in 2024, rising 12% from the previous year. As noted by Accenture, total AUM at the world’s 500 largest asset managers rose to $139.9 trillion at the end of 2024. However, global AUM growth is, as suggested by Moody’s, increasingly concentrated at the top, with the largest firms capturing a disproportionate market share. The top 20 asset managers controlled around 47% of global AUM in 2024.
Asset managers face structural fee compression due to the proliferation of passive investment products and rising investor cost-awareness. According to the Morningstar Active/Passive Barometer 2025, passive funds charge up to 60% lower fees than actively managed funds. When combined with increasing compliance costs for greater transparency and reporting, margins are severely compressed.
Identifying the profitability gap. Oliver Wyman noted that fund managers with over $2 trillion in assets have average margins of roughly 45%; those with less than $500 billion have 36%. Mid-sized firms (the “Valley of Death”) have average margins of 26%. It seems these middle sized management firms tend to compete in the same way as the largest management firms.
Asset managers face structural fee compression due to the proliferation of passive investment products and rising investor cost-awareness. According to the Morningstar Active/Passive Barometer 2025, passive funds charge up to 60% lower fees than actively managed funds. When combined with increasing compliance costs for greater transparency and reporting, margins are severely compressed.
Identifying the profitability gap. Oliver Wyman noted that fund managers with over $2 trillion in assets have average margins of roughly 45%; those with less than $500 billion have 36%. Mid-sized firms (the “Valley of Death”) have average margins of 26%. It seems these middle sized management firms tend to compete in the same way as the largest management firms.
They are too diverse and often too large to benefit from simpler operating models, but not large enough to operate at scale. They cannot easily acquire competitors and therefore may have to become more focussed asset or sector specialists.
The shift to private markets: Asset managers not only have to justify their fee structures in public markets, but also compete with private markets and alternative asset managers to scale model portfolios effectively and efficiently. There is a growing convergence across public and private markets and a blurring of wealth and asset management as well as product and distribution modes. According to Moody’s Global Asset Management 2026 outlook, private markets are likely to generate more than half the asset management industry’s total revenue by 2030, because they currently produce about four times as much profit per $1 billion in assets under management as do traditional managers. This means that in a higher for longer rate environment, traditional asset management firms with origination targets will become more challenged than those alternative providers who may have greater flexibility around volume targets and collateral types.
The shift to private markets: Asset managers not only have to justify their fee structures in public markets, but also compete with private markets and alternative asset managers to scale model portfolios effectively and efficiently. There is a growing convergence across public and private markets and a blurring of wealth and asset management as well as product and distribution modes. According to Moody’s Global Asset Management 2026 outlook, private markets are likely to generate more than half the asset management industry’s total revenue by 2030, because they currently produce about four times as much profit per $1 billion in assets under management as do traditional managers. This means that in a higher for longer rate environment, traditional asset management firms with origination targets will become more challenged than those alternative providers who may have greater flexibility around volume targets and collateral types.
Combat passive strategies
The rise of passive strategies, fuelled by the failure of many active managers to deliver long-term outperformance, is a fundamental challenge leading to fee compression. Asset managers must shift from a focus on pure beta to providing specialised, high-conviction alpha, leveraging AI to improve portfolio personalisation. A strategic divergence is emerging between large diversified platforms aiming for scale and highly specialised boutiques.
Specialisation vs scale. If an asset manager cannot achieve scale, specialisation is often preferable. McKinsey research indicates that specialist buyout funds generate better returns (17% pooled IRRs) than their generalist peers (13% pooled IRRs), underpinned by a focus on operational value creation.
The rise of ETFs. As observed by Deloitte in its 2026 Investment Management Outlook, customer preferences and regulatory change are contributing to firms transforming product lines from mutual funds to ETFs, with over $60 billion in assets making the transition.
Specialisation vs scale. If an asset manager cannot achieve scale, specialisation is often preferable. McKinsey research indicates that specialist buyout funds generate better returns (17% pooled IRRs) than their generalist peers (13% pooled IRRs), underpinned by a focus on operational value creation.
The rise of ETFs. As observed by Deloitte in its 2026 Investment Management Outlook, customer preferences and regulatory change are contributing to firms transforming product lines from mutual funds to ETFs, with over $60 billion in assets making the transition.
Consolidation and M&A
The consolidation wave accelerating through the industry is both a strategic risk for those left behind and an opportunity for those building scale. Asset management firms have been targeting firms that provide entry into the expanding private market space, into real assets or that have successfully incorporated advanced technologies that provide demonstrated ROI with relevant efficiency gains and cost reductions.
As highlighted by McKinsey in its Global Private Markets Report, total M&A deal value involving the top 100 alternative asset managers acquiring others reached its highest value since 2006 in 2025 (approximately $34 billion, almost double the $18 billion recorded in 2024).
As highlighted by McKinsey in its Global Private Markets Report, total M&A deal value involving the top 100 alternative asset managers acquiring others reached its highest value since 2006 in 2025 (approximately $34 billion, almost double the $18 billion recorded in 2024).
Wealth and asset management players continue to consolidate, with 156 deals worth a total of $113 billion in 2025 alone.
M&A is shifting towards capability-led deals that strengthen expertise in alternative assets. McKinsey found that managers are targeting firms that provide an edge in private markets, real assets, or advanced technology.
The use of generative and agentic AI is expected to accelerate M&A by making it easier to quickly integrate acquisitions and capture synergies.
M&A is shifting towards capability-led deals that strengthen expertise in alternative assets. McKinsey found that managers are targeting firms that provide an edge in private markets, real assets, or advanced technology.
The use of generative and agentic AI is expected to accelerate M&A by making it easier to quickly integrate acquisitions and capture synergies.
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While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.