Domestic equity, fixed income and alternatives markets worldwide are forecast to record nearly US$20 trillion in net flows over the next eight years, according to strategic consulting firm Indefi, compared to US$4.5 trillion for international investments.
By 2030, the firm expects that 85 per cent of global assets will be held in local investments, up from 74 per cent in 2021, and 79 per cent in 2014.
According to Indefi, retail investors will drive de-globalisation, with non-professional investors expected to account for 61 per cent of a predicted US$175 trillion in global assets under management by 2030, an increase from 52 per cent in 2021.
Meanwhile, the share of assets held by institutional investors is forecast to fall from 31 per cent in 2021 to 26 per cent in 2030.
“If a portfolio manager teleported from 2020 into 2030, they would most likely not recognise their industry,” said Indefi managing partner and report co-author Daniel Celeghin.
“With the increasing importance of retail in asset management, more domestic investments gaining traction, technology such as artificial intelligence and cryptocurrency making significant inroads, and the growing footprint of China, we expect the 20th century norms of asset management to be substantially altered by the end of the decade.”
Moreover, the firm said 67 per cent of global industry revenues in 2030 will come from retail investors, up from 61 per cent last year. This is expected to further fuel the de-globalisation trend.
China is expected to account for 45 per cent of net new investment flows for asset managers by 2030, as well as 18 per cent of assets under management, up from 11 per cent in 2021.
In comparison, the US is tipped to account for 29 per cent of net new flows, with a drop in the country’s share of global assets from 52 per cent in 2021 to 46 per cent by 2030.
Indefi predicted that returns were set to be “redefined” in the coming years with peer rankings and benchmark-relative returns superseded.
“Going beyond financials returns, investors (and policymakers) have embraced non-financial ‘alpha’, clearly seen in the explosive growth of ESG and sustainability,” the firm said.
“Managers should take a step back and acknowledge the substantial change this wave represents. Life was easier when maximising excess returns was the sole investment objective.”
Failing to include sustainability in investment decisions was now seen as a form of negligence in markets including Australia and Europe according Indefi.
The firm also drew attention to cryptocurrency as being “too large to simply ignore” with a total market cap greater than the entire US high yield bond asset class.
“Crypto’s volatility and retail ownership have resulted in a trading environment where legacy investment strategies and heuristics (long ago exhausted in public equities) have a high information ratio,” Indefi said.
“So far, this feature has been capitalised by institutions trading proprietary capital, but some early hedge funds are showing the way asset managers could also profit.”
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
