The global asset management industry has managed to do something that very few other industries have in pandemic times; it experienced its strongest growth in 10 years, hitting an all-time high of $114.7 trillion in assets under management in 2020, according to a McKinsey and Company report.
One of the areas that experienced the most growth was fixed income products, which saw increases in both passive and active strategies. Net flows were $230 billion in passive funds and $257 billion in actively managed funds, and the asset class saw an uptick in interest by major institutional investors, reported Institutional Investor.
Fixed income ETFs in particular were popular, “as the resilience of these vehicles in the most volatile days of the pandemic helped to assuage prior investor concerns about liquidity,” the report said.
The report indicated that a trifecta of factors caused this increase in investment into fixed income in the last year. As a large portion of the population ages and reaches retirement thresholds, assets are being moved into “more stable yield-oriented assets,” according to the authors. The priorities are changing for many investors, moving percentages of assets from equity investing into fixed income to ensure a stable income. Another reason is the cyclical nature of investing and investors working to rebalance their overall portfolios to stay on course with their investment strategies and asset allocation goals.
However, the main factor that McKinsey attributes the growth into fixed income to is the fact that active managers within the asset class have shown that they can (and typically do) outperform benchmarks and provide investors with dependable returns.
Looking forward into an eventual post-pandemic economy, McKinsey believes that the core themes that will drive the asset management industry as a whole will include policy changes, ESG concerns, new innovations in business models, and digitalization. Active managers, in their ability to adapt constantly to evolving market trends and changes, could benefit greatly from the shifting tides of investment strategies and the potential volatility that fundamental changes would bring.
“As the industry crosses the horizon into this new post-pandemic era, asset managers will need to adapt their models to preempt the disruptions that lie ahead and adopt a new sense of purpose and innovation as they head into a unique decade of growth,” the report said.
Active management firm T. Rowe Price believes in the difference and benefits to active investing and active management. The firm currently offers three actively managed fixed income ETFs for investors looking for reliable returns.
The T. Rowe Price Total Return ETF (TOTR) seeks to maximize returns through diversified investments of bonds and other debt instruments.
The T. Rowe Price QM U.S. Bond ETF (TAGG) seeks returns that exceed the performance of the U.S. investment-grade bond market, represented by the Bloomberg U.S. Aggregate Bond Index.
The T. Rowe Price Ultra Short-Term Bond ETF (TBUX) seeks to invest in diversified shorter-term investment-grade corporate and government securities, asset-backed securities, and bank obligations.
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