McKinsey Report: Asset Management’s $10 Trillion Shake-Up

McKinsey Report: Asset Management’s $10 Trillion Shake-Up

Global asset management has rebounded to record highs, but behind the headline numbers lies a story of squeezed margins, shifting investor preferences, and an industry on the brink of historic transformation. The «great convergence» of traditional and alternative investing is reshaping the game – and could put as much as $10.5 trillion in motion.

Global assets under management (AUM) hit an unprecedented $147 trillion by mid-2025, boosted by a roaring 2024 that saw the largest annual gain of the decade. But the recovery is uneven, according to McKinsey's latest «Asset Management 2025» report.

Asia surged ahead with 8.4 percent net flows, while Europe staged a comeback after years of weakness. Individual investors – particularly high-net-worth and insurance clients – drove more than 80 percent of flows, leaving traditional institutional channels lagging.

Profits Stuck in the Slow Lane

Despite record AUM, profitability remains elusive. Revenues climbed by double digits in 2024, but margins barely moved, rising just one percentage point.

Costs ballooned to $167 billion, with technology spending – often on outdated infrastructure rather than innovation – jumping 9 percent. Headcount expansion and higher fixed compensation compounded the problem, leaving many firms with scale but little leverage.

Winners and Losers

Three types of firms are pulling ahead: those with proprietary distribution access, scaled multi-asset platforms, and large alternative managers. These players are capturing disproportionate inflows, especially from the booming wealth segment.

By contrast, firms still reliant on active equity mutual funds or slow-growth institutional channels are bleeding assets, trapped in outdated models and facing relentless fee pressure.

Three Disruptive Trends

McKinsey flags three forces set to reshape the industry:

• Home country bias returns: Investors are shifting from global to local exposures, challenging US dominance. Even a one percent swing could move $1 trillion.
• Active ETFs go mainstream: Once niche, they captured 37 percent of ETF flows in 2024 and are redefining active management.
• The great convergence: Traditional and alternative managers are blending models, with public–private products, semi-liquid funds, and bold M&A moves blurring old boundaries.

Together, these trends could unleash between $6 trillion and $10.5 trillion in «money in motion» over the next five years.

The Democratization of Alternatives

Once reserved for institutions and the ultra-wealthy, private markets are opening to a broader audience. Semi-liquid funds, evergreen vehicles, and public–private model portfolios are being adopted by affluent and even mass-affluent investors.

Defined contribution plans may be next. High-net-worth investors remain the biggest near-term prize, with vast untapped demand for alternatives.

Industry at a Crossroads

The report concludes that survival will depend on bold strategic moves: smarter partnerships, AI-enabled distribution, innovative portfolio solutions, rewired investment engines, and unified technology platforms. Firms that adapt can thrive in this era of convergence; those that cling to old models risk being left behind.

As the authors put it, «the great convergence in asset management is a future about blending, scaling, and innovating – all at once».