This is the first chapter of a three-part annual report on the global asset management industry and the trends shaping its future. The full 2026 Global Asset Management Report: An Imperative for Growth is available as a PDF download
For more than a decade, rising markets did most of the work. Assets grew, and revenues followed. This dynamic may not be over, but it will no longer carry the industry.
Global assets under management (AuM) reached $147 trillion in 2025, up 11% year over year, while aggregate profit margins held above 30%. The industry appears resilient. But more than 80% of gross revenue growth in 2025 was driven by market appreciation, underscoring its continued reliance on external forces. (See Exhibit 1.)
This reliance is not new. What is changing is where growth comes from and who captures it. Capital is redistributing across regions, vehicles, and client segments. New gatekeepers are emerging, distribution is evolving, and technological forces—particularly AI—are reshaping the economics of asset management. As a result, market tailwinds no longer benefit incumbents by default. Capturing net new flows is now the central competitive differentiator.
This will require asset managers to operate differently. Firms that align with the next sources of capital and adapt how they compete will capture a disproportionate share of future growth.
A Growth Formula Under Pressure
Industry assets continue to expand, but the benefits are increasingly uneven. This reflects changes in where demand is coming from, how it is captured, and how it translates into profitability.
Sources of growth are shifting.
Retail investors are now the primary driver of AuM growth, accounting for 61% of global expansion between 2020 and 2025. Retirement systems are increasingly redirecting flows as defined contribution plans expand and defined benefit pools mature. Growth is also becoming more dispersed geographically, with Asia-Pacific posting the fastest gains at 9% annually over the same period, supported by strong net inflows. (See Exhibit 2.)
These patterns are also visible across asset classes. Retail investors dominate much of the traditional product landscape, including active equity, fixed income, exchange-traded funds (ETFs), and money market funds, while institutional investors remain the primary allocators to alternatives. As a result, the market is becoming more segmented, with client channel and product strategy increasingly intertwined. New distribution channels are also emerging, with insurance likely to become a particularly important channel for private credit. (See “Private Credit’s Insurance Opportunity.”)
Private Credit’s Insurance Opportunity
Many insurers lack the capability to access private credit at scale on their own. That’s where asset managers come in. Through sub-advisory mandates, joint ventures, or captive platforms, these partnerships create value on both sides. They bring the origination networks, structuring expertise, and portfolio capabilities that insurers need, while providing asset managers with seed capital, long-term institutional allocations, and shared marketing costs.
Over time, platforms are integrated into insurers’ investment processes, aligned with asset-liability management frameworks, and connected to core operations. Asset managers are also engineering exposures directly, using rated notes and other capital-efficient vehicles to fit insurance capital frameworks. Early movers can build these capabilities into their product architecture. Once in place, that integration is difficult to unwind, making the asset managers that enable it hard to displace. As these structures scale, they become a more central part of capital deployment, effectively turning private credit into insurance-compatible instruments.
But executing these shifts well requires more than a compelling strategy. Retail clients have different liquidity expectations than institutional ones, and client segmentation across mass-affluent, high net worth, and institutional tiers needs to be rigorous. Any arrangement has to sit comfortably within the insurer’s broader balance sheet logic, including asset-liability management constraints, duration matching, risk appetite, and solvency capital requirements. Getting this right requires optimizing capital efficiency, which introduces additional complexity in structuring, valuation, and risk management.
Some asset managers have begun building their insurance product portfolios, but the opportunity remains significant, and the market is still early. Here’s how to get started.
Choose the right partnership model.
Distribution-only arrangements, where an insurer offers an existing fund through its platform, are the natural starting point. Co-designed products, developed jointly within a unit-linked wrapper, require greater capability but deliver stronger economics and defensibility through deeper product integration and balance sheet commitment. Strategic capital partnerships—where the insurer provides seed capital or a balance sheet allocation—are the most ambitious and the hardest to replicate once established, given the depth of financial alignment and integration.
Secure your structural position.
Access to an insurer’s product shelf is not the same thing as being embedded in its core unit-linked platform. Formal inclusion determines volume steering, margin capture, and long-term defensibility. For managers still building their private credit offering, the priority is an anchor insurer relationship with genuine alignment on client base and scale ambition. Managers with more established offerings should diversify across insurers to broaden reach and reduce concentration risk.
Design the product for the insurance wrapper.
Wealth accumulation and retirement income products have materially different portfolio construction and liquidity requirements, so the choice of use case matters. Asset duration needs to match insurance liabilities, enabling hold-to-maturity strategies rather than mark-to-market sensitivity. Returns expectations should be framed around stable spread generation and downside protection, not high internal rates of return. Liquidity mechanics, including evergreen formats and defined withdrawal windows, must map to underlying loan cash flows. Risk allocation also needs to be set upfront, including whether retail investors access only senior exposure and whether the insurer retains the junior or first-loss layer. Where capital-efficient structures are used, transparency, governance, and regulatory alignment become critical, as increasing scrutiny may shape how these solutions evolve.
Capturing growth is more complex.
In US passive mutual funds and ETFs, flows are highly concentrated among a small number of firms, with the top ten providers capturing more than 90% of net inflows since 2015. Active strategies show a different pattern. In the US, the top ten active managers’ share of net inflows has fallen from 63% in 2015 to 56% in 2025 as flows spread across a larger number of competitors. In Europe and Asia-Pacific, both active and passive markets are becoming less concentrated, indicating increasingly competitive environments.
In private markets, investors continue to allocate significant capital to the asset class, but they are doing so with fewer managers. The top 50 private equity firms captured 37% of global fundraising in 2024, compared with a ten-year average of 22%, according to Preqin. Taken together, and as access to distribution increasingly determines which managers are even considered for shelf space, these shifts point to a more demanding growth environment.
Rising AuM no longer translates into higher profitability.
Global AuM has more than tripled and revenue more than doubled over the past 15 years. Yet industry profit margins remain close to 30%, roughly where they stood in 2010. Between 2010 and 2025, revenues grew at 5.1% annually while costs rose slightly faster at 5.4%, producing negative operating leverage.
Several forces are driving this dynamic. Institutional fees have declined by 3% annually, passive funds and ETFs now dominate net inflows, and active ETFs are gaining share at fee levels below the vehicles they are replacing. Each incremental dollar of AuM therefore carries a lower average fee.
Costs add to the pressure. Some expenses decline as firms scale, particularly investment management and support functions that benefit from operating leverage. However, technology investment is rising as a share of the cost base as firms build scalable infrastructure and advanced capabilities. These offsetting forces limit the margin benefits traditionally associated with scale. (See Exhibit 3.)
Three Structural Demand Shifts
Looking ahead, control of capital, retirement savings, and geopolitical confidence will determine where future flows originate.
The Generational Succession
An unprecedented transfer of wealth is reshaping the retail investment landscape. It is estimated that nearly $124 trillion will move between generations in the US through 2048. The recipients of that capital are increasingly digital-native investors whose relationship with financial services looks very different from their predecessors.
Digital-native investors enter markets earlier—30% of Gen Z begin investing in early adulthood versus 6% of Baby Boomers, according to a World Economic Forum investor survey. They expect integrated digital experiences and show greater openness to alternatives, including private markets and digital assets. They are also reached through fundamentally different channels. BCG research shows that comparison websites, social media, and YouTube now rank among the most influential sources shaping retail investment decisions—channels where the asset management industry has almost no meaningful presence.
Control of the investor relationship is also shifting. In Europe, neobroker assets surpassed €150 billion in 2023. In the US, retail investors now account for roughly 20% to 25% of daily equity trading volume, much of it intermediated through digital platforms. Across Asia-Pacific, retail investors are entering markets through digital channels, using mobile wallets and cash management products as primary entry points.
The rise of digital-native investors is concentrating flows in a smaller set of platforms that act as gatekeepers to capital. For asset managers, success will depend on being embedded in these ecosystems, with products and capabilities designed for how capital is allocated within them.
Stay ahead with BCG insights on financial institutions
Retirement System Transformation
Retirement systems are steadily moving away from defined benefit (DB) and pay-as-you-go structures toward funded defined contribution (DC) models, following a transition the US began several decades ago. The shift comes in response to two parallel structural pressures: a growing pension cliff as obligations outpace funded assets—and a rising demographic cliff driven by aging populations, shrinking workforces, and rapidly rising old-age dependency ratios. (See Exhibit 4.)
The implications of this shift vary by region.
- United States. The US system is already DC-led: DC accounts for over 50% of pension assets, with total pension assets at around 153% of GDP. Growth will center on income solutions, advice integration, personalization, and the ability to compete within workplace plans and retirement platforms that serve as primary distribution channels. A potential frontier is the inclusion of private market allocations within DC plans, though regulatory, liquidity, and operational hurdles mean adoption will be gradual.
- Europe. Europe presents greater catch-up potential, albeit with significant variation across markets. Funded pension assets average roughly 33% of GDP across Continental Europe, with Germany, Italy, and Spain still in the low double digits. At the same time, many European systems face some of the steepest increases in old-age dependency ratios globally, intensifying pressure to shift toward funded and DC-style structures. The Netherlands offers a current illustration. Its Future Pensions Act requires the EU’s largest pension system—€1.8 trillion in assets—to transition from DB to DC by 2028, with the bulk of large funds moving through 2026 and 2027.
- Asia-Pacific and emerging markets. Demographic pressure is acute across much of Asia and many emerging economies, though the development of funded retirement systems remains uneven and policy-driven. Where DC frameworks expand, retirement pools can scale quickly. Where reform is slower, savings tend to accumulate through wealth management, insurance products, and occupational arrangements.
Across markets, the shift from DB to DC is changing the structure of retirement investing. Assets that once flowed through a small number of institutional mandates are increasingly held in millions of individual accounts, raising customer acquisition costs, increasing service complexity, and placing greater emphasis on scale and distribution.
The Geographic Confidence Shift
Geopolitical and policy uncertainty have introduced volatility into capital allocation decisions. Questions around US Federal Reserve independence, fiscal sustainability, trade policy, and political stability have moved from background considerations to active inputs in how investors think about geographic exposure. The US remains the world’s dominant investment market, but that dominance is now being scrutinized in ways it has not been for a generation.
The sentiment shift is measurable. A Natixis Investment Managers survey found that 63% of global investors believe the politicization of US institutions weakens the country’s investment case, a view shared by more than half of US investors themselves. Nearly half of global investors plan to increase geographic diversification, with Europe (46%), Asia-Pacific (44%), and Emerging Asia (42%) the primary intended destinations, compared with just 25% that intend to increase US exposure. Actual portfolio allocations, however, don’t yet reflect that shift.
Whether these changes prove structural or cyclical remains an open question. What is becoming clearer is that the forces behind them are broader than a simple US versus rest-of-world rotation. Shifting trade relationships, rising barriers to cross-border capital flows, nationalist policies directing investment toward domestic infrastructure, and a broader retreat from globalization all point toward a higher-friction environment for global capital allocation.
For asset managers, geographic diversification is becoming a baseline requirement. Competing effectively requires local distribution capability, locally relevant products, and the ability to intermediate cross-border flows across an increasingly fragmented regulatory landscape.
Technology and the Changing Basis of Competition
Technology underlies many of the structural shifts shaping the industry. Most immediately, AI is raising the competitive bar while shortening the time firms have to respond.
For more than a decade, asset managers have invested heavily in technology, often layering new systems onto already complex architectures rather than simplifying. As firms scale from $50 billion to more than $1 trillion in AuM, technology spending rises from roughly 5% to 15% of total costs. Yet that investment, combined with the shift toward lower-fee products, has failed to deliver margin expansion.
AI will change that equation across the value chain. It compresses the information and cost advantages that have historically separated firms, while enabling non-linear scalability that decouples AuM growth from headcount. It will also transform traditional retail distribution and marketing and change what asset managers can demand from third-party providers in both capability and cost.
Our baseline estimates suggest that asset managers could see cost reductions of 25% to 35% over three to five years, a two-to-five-fold expansion in research coverage, and a three-to-five-fold increase in client coverage per relationship manager. Capturing that upside requires structural redesign of operating models, data infrastructure, and talent, rather than continuing reliance on pilots and incremental productivity gains. Without it, AI-native operators will pull further ahead.
Tokenization and digital assets represent a different, less predictable technological force. Deeper disruption may come from the convergence of tokenization with stablecoin adoption, new regulatory clarity including MiCA in Europe and the GENIUS Act in the US, and the development of tokenized infrastructure that could enable real-time settlement and programmable assets. These developments are still taking shape, but rising adoption could reshape settlement processes, product design, and competitive dynamics across the investment management landscape. (See “Tokenization Is Gaining Momentum.”)
Tokenization Is Gaining Momentum
Regulatory frameworks are evolving, though unevenly. In several jurisdictions, including Europe, Asia, and the UAE, clear foundations have existed for years. More recently, additional guidance has focused on tokenized assets specifically. In the US, clarity is gradually improving, while initiatives such as Singapore’s Project Guardian and Hong Kong’s Project Ensemble are enabling products within existing frameworks.
Stablecoins and on-chain treasury products and repos are already used at scale, with activity in the hundreds of billions. By contrast, tokenized real-world assets (excluding stablecoins and repos) remain under $25 billion, but the market is expected to expand rapidly. Despite uncertainty and a range of possible outcomes, BCG’s middle-of-the-road scenario estimates that the total value of tokenized real-world assets could reach $14 trillion by 2030 and $55 trillion by 2035. (See the exhibit.)
Adoption is likely to broaden in stages, starting with money-like exposures where settlement and liquidity benefits are clearest, then extending into more complex markets as regulatory and operating conditions mature. Tokenized funds could evolve into a winner-take-most market, as passive ETFs did. But new rails could also weaken some traditional sources of scale and distribution strength, opening access to a broader set of players, including non-traditional entrants.
Scaling depends on regulatory alignment, credible secondary markets, and institutional-grade controls that are not yet standardized. If those pieces come together, adoption could accelerate quickly. Here’s how asset managers can make that happen.
Set a strategy before the window closes.
Managers need to determine which exposures become more accessible, liquid, or usable across platforms through tokenization. Money market funds are the natural starting point, with a path into private credit, private equity, and real estate as structures mature. Advantage will come from trust, distribution, and operational capability.
Treat distribution as the core battleground.
In tokenized markets, distribution is closely linked to how products are held, transferred, serviced, and monetized, defining economics and client portability. It also creates switching costs that can be hard to unwind. Asset managers should make a small number of scaled bets in the most promising channels to build credibility and capability, while negotiating portability, data rights, and commercial terms up front and preserving flexibility as the market evolves.
Build a repeatable launch capability.
Tokenization will reward speed and consistency. Firms need standard processes for onboarding and eligibility, embedded governance and controls, and a focus on jurisdictions where the rules are clear. Taking this approach will provide leaders with structural advantage as the market scales, allowing them to launch products quickly as regulation advances and demand shifts.
The Path Forward
Profitable growth depends on deliberate choices about where to compete and how to build structural advantage. Here’s where to play and how to win.
Go where the flows are and build distribution that scales.
Concentrate resources where capital is structurally moving and where the firm has a clear advantage. Build a systematic distribution engine, segmenting with precision, aligning coverage to opportunity, and embedding into the client workflows and platforms that shape how capital is allocated. Layer AI on top of the engine to scale reach across channels without proportionally scaling cost.
Hone wrapper capabilities to compete where capital is moving.
Deploy investment capabilities across a range of structures, choosing the right wrapper for the right exposure and client need. Capital is shifting toward vehicles that offer lower cost, greater customization, and broader access to private markets, including active ETFs, separately managed accounts, direct indexing, and hybrid public-private vehicles. Tokenization is also opening new rails, enabling instant settlement, programmability, and fractionalized cross-border access.
Integrate into client value chains.
Move beyond selling products to become part of how clients invest—as a portfolio construction partner in institutional channels and an infrastructure layer in wealth ecosystems. Different clients require different approaches. In insurance, asset managers that bring private credit capabilities and wire them directly into insurers’ investment platforms and product architecture can build durable distribution positions.
Create operating leverage before scale.
Simplify operating models and retire legacy systems to reset the cost base with AI at the center. A redesigned platform absorbs more AuM, products, and clients at lower marginal cost, making M&A and partnerships genuinely accretive when they reinforce priority segments or unlock capabilities. Without that foundation, scale adds complexity, not advantage.
Build toward an AI-first asset manager.
Across each of these choices, the firms that win will be those that go all in, embedding AI not as a layer of tools, but as the foundation of how they invest, distribute, and operate. This requires a unified data architecture, AI-fluent talent, and governance designed for speed. These are the building blocks that determine whether AI compounds advantage. Over time, this capability allows structural differentiation—enabling faster decision-making, scalable personalization, and sustained operating leverage that competitors cannot easily replicate.
Market performance drove industry growth for more than a decade. That formula is changing. Structural demand shifts are reshaping where capital flows, while technology is redefining how firms compete. The imperative now is to build profitable growth that does not solely rely on markets through the disciplined deployment of AI and distribution designed to scale.
