NEW YORK (December 4, 2024) – ISS Market Intelligence (ISS MI), a leading global provider of data and insights to the global financial services industry, announces the latest edition of its State of the Market: Future of Retail Products Report.
The report projects long-term U.S. AUM to hit $43.6 trillion in 2029, a projected 7.1 percent annualized rise over five years. Despite a slow-down in AUM growth overall, asset managers should benefit from improving sales growth, and expanding product categories such as active ETFs and private markets, and stronger-performing markets in bonds and non-U.S. equities.
As lower yields reduce cash’s appeal, organic growth will likely accelerate slightly, with long-term funds expected to gain $2.8 trillion in net flows by 2029. Taxable bond funds, driven by favorable demographics and falling rates, anticipated to attract $2.1 trillion in new flows.
The report highlights significant growth in the adoption of active ETF investment strategies. Fund buyers have gravitated toward younger offerings to an unusual degree, with more than 40 percent of AUM growth since 2021 accruing to funds less than three years old. The report also describes active ETFs increasingly becoming the advisors’ vehicle of choice and the primary engine of new product development from asset managers.
While the report explains that index ETFs are expected to capture 70 percent ($2.2 trillion) of the $3.1 trillion in ETF flows, active ETFs offer an attractive avenue for growth. The report forecasts market share will grow from approximately 2.8 percent to almost 4.9 percent over five years, generating an outsize share of the industry’s revenue growth.
Christopher Davis, U.S. Head of Research at ISS Market Intelligence commented: “Over the next five years, asset managers will confront familiar challenges, such aging demographics and index funds’ ongoing market share gains. They will also encounter new competitors as traditional alternatives managers increasingly intrude upon their turf. While these market dynamics offer potential for peril, the rapid emergence of new product types and distribution channels provide new opportunities for active managers to succeed.”
Additionally, the report finds rising demand for alternatives of all sorts. Liquid alternative demand has been propelled in recent years by crypto and defined outcome funds, but semi-liquid structures present an exceptionally promising frontier for managers looking to gain enhanced revenue protected from passive encroachment. Interval fund launches surged in 2024, with AUM hitting $83 billion by September. Tender offer funds and BDCs, especially those focused on private credit, are also growing.
Davis adds: “Our research underscores a pivotal transformation in the investment landscape. The convergence of increased market complexity and investor sophistication is driving the shift toward active strategies and liquid alternatives. As 2029 approaches and AUM looks to rise to $43.6 trillion, market participants must remain agile, leveraging data-driven insights to navigate this dynamic environment.”
Enhanced data analytics and sustainability considerations are becoming integral to investment decision-making, further influencing asset flows and performance outcomes.
To learn more about the research, please visit https://marketsage.issmarketintelligence.com/researchPeriodicals/researchPeriodicalIssues?id=clnokenqo24t40ble7ip7jta2 .
For additional information on the range of research available from ISS Market Intelligence, visit https://marketsage.issmarketintelligence.com/.
###
About ISS Market Intelligence
ISS Market Intelligence (MI) is a leading provider of data, insights, and market engagement solutions to the global financial services industry. ISS MI empowers asset and wealth management firms, insurance companies, distributors, service providers, and technology firms to assess their target markets, identify and analyze the best opportunities within those markets, and execute on comprehensive go-to-market initiatives to grow their business. Clients benefit from our increasingly connected global platform that leverages a combination of proprietary data, powerful analytics, timely and relevant insights, in-depth research, as well as an extensive suite of industry-leading media brands that deliver unmatched market connectivity through news and editorial content, events, training, ratings, and awards.
About ISS STOXX
ISS STOXX GmbH, through its group companies, is a leading provider of comprehensive and data-centric research and technology solutions that help capital market participants identify investment opportunities, detect qualitative and quantitative portfolio company risks, and meet evolving regulatory requirements. With roots dating back to 1985, we today deliver world-class benchmark and custom indices across asset classes and geographies and serve as a premier source of independent corporate governance, sustainability, cyber risk, and fund intelligence research, data, and related offerings. Our products and services give clients the scale and leverage they need to grow their business more effectively and efficiently. ISS STOXX, which is majority owned by Deutsche Börse Group, is comprised of more than 3,400 professionals operating across 33 global locations in 19 countries. Its approximately 6,400 clients include many of the world’s leading institutional investors who turn to ISS STOXX for its objective and varied offerings, as well as companies focused on ESG, cyber, and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS STOXX’s expertise to help them make informed decisions to benefit their stakeholders.
Media Contact:
Terra Chang
Senior Associate, Marketing
press@issmarketintelligence.com
