The concentration of assets managed by the top 20 largest fund groups reached its highest level on record last year amid increased M&A in the industry, research by Willis Towers Watson has found, as it also warns the sector faces "massive change and disruption".
The Thinking Ahead Institute, a not-for-profit hub set up by Willis Towers Watson, conducted research which found the 20 largest asset management firms around the globe account for 43.3% of the top 500 managers' total assets under management (AUM).
Their assets increased for the fourth consecutive year by 18.3% to $40.6trn in 2017.
This is the highest level of concentration since the hub began carrying out research in 2000.
Furthermore, in eight of the previous ten years, assets managed by the largest 20 firms have exceeded the growth rate of the wider 500 asset managers.
There were 12 US managers in the top 20 accounting for 69.8% of the total AUM - although this was down from 13 managers and 72.8% of assets in 2016.
Concentration among asset managers has increased in recent years amid rising M&A activity, including the mega-mergers of Janus Capital and Henderson Global Investors, as well as Standard Life and Aberdeen Asset Management in 2017.
According to the research, BlackRock retained its number one spot with $6.3trn AUM, a position it has held since 2009, as Vanguard Group and State Street Global complete the top three with $4.9trn and $2.8trn AUM respectively.
However, Vanguard, Dimensional Fund Advisors and Eaton Vance have seen the fastest growth in AUM between 2012 and 2017, with all three reporting rises of 17%.
Bob Collie, head of research at the Thinking Ahead Institute, commented: "The names at the top of the ranking are familiar names and there is greater concentration in the biggest names."
Total AUM among the top 500 asset managers increased to $93.8trn in 2017, up 15.6% from the previous year and the fastest growth rate since 2009.
Despite this, North American-based firms saw their market share of total assets fall for the first time since 2008 with assets declining to 58.1%, while European managers accounted for 31.8%, Japan 4.8% and the rest of the world 5.2%.
Collie continued: "Once again, total assets have increased; the rate of growth in 2017 is the biggest since 2009.
"On the surface, the numbers might appear to tell a story of steady growth and of stability. But when you look at broader developments within and beyond the industry, there are signs that the industry is facing significant change."
The report also warned the industry is facing a period of "massive change and disruption" resulting from technological, demographic, economic and environmental shifts.
It said the successful asset managers over the next few years will not avoid these industry realities, adding firms need to respond to the move away from traditional investment models.
"The importance of culture will only grow - culture will be less and less a by-product and increasingly explicit and by-design," the report said.
Collie added: "These changes affect business models, people models, operating models and distribution models as well. They will be felt in every corner of the organisation.
"Different firms are going to choose to respond to these challenges in different ways. Successfully responding to these new industry realities may prove to be as much a test of character and culture as it is a test of traditional business and investment skills."
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