Larger, Older, Richer: Welcome to the Age of Asset Management
If they clamp down too hard, the money will go somewhere else, to a place we only dimly understand. Beyond the banks, the logic goes, there be monsters. In a speech last week to a group of asset managers in London, Andrew Haldane, in charge of financial stability for the Bank of England, began to map out the land of the monsters. The number of people saving money in the world has grown larger, older, and richer, he said. Life expectancy is rising—as is population and per-capita GDP. And all these rich old people need to put their savings somewhere. It is not going into savings accounts but instead into a category known as assets under management, or AUM: pension funds, exchange-traded funds, hedge funds, private equity.
AUM in the U.S. was about half of GDP in the 1940s; it has now grown to almost two and a half times GDP. Global AUM will top $100 trillion in 2020, according to PricewaterhouseCoopers. The world has entered what Haldane terms the Age of Asset Management. The world’s biggest asset manager, BlackRock (BLK), is much larger than the world’s biggest bank, China’s ICBC (1398:HK). We are beyond the banks. There be monsters.