The assets controlled by the 500 biggest fund management firms in the world grew by 15.6 percent last year — and the top 20 firms now manage a big chunk of that total.

Last year the combined assets of the 500 biggest asset managers reached $93.8 trillion, but the top 20 firms now control a record 43 percent of assets, according to an annual study released today by research and advisory firm Willis Towers Watson and Pensions & Investments. Industry asset growth hasn’t been this high since 2009. 

That may be depressing news for any small or medium-size manager looking to expand in an industry facing a lack of organic growth. The concentration of assets in the top 20 firms in 2017 is the highest since the consultant’s first study of the top 500 asset managers, released in 2000.

This is the fourth straight year that the share of assets managed by the Top 20 firms has grown. These firms’ assets under management grew 18.3 percent, to reach $40.6 trillion.

Amanda Tepper, founder and CEO of Chestnut Advisory Group, a business advisor to asset managers, isn’t worried about the concentration of assets in the top 20 managers and its effect on smaller managers.

“It’s still a really inefficient and heterogeneous business,” said Tepper in a phone interview. “A lot of firms in the top 20 actually own a bunch of boutiques themselves. They tend not to integrate them, because then you kill what’s special,” said Tepper. “It’s a model that can work because the parent company can turn them into a profitable business and the manager can focus on investing.”

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The growth of passive investing has bedeviled active managers since the financial crisis — and last year was no different. Passive assets grew by a stunning 25 percent in 2017, according to the study.

“The asset management industry is facing a period of massive change and disruption resulting from the confluence of several global megatrends: technological, demographic, economic, environmental and social,” wrote the authors of the report. “The successful asset management firms over the next few years won’t dodge these industry realities.”

Even as investors have been rushing into index funds because of their low cost and simplicity, asset managers have been busy with product development and dealing with regulatory initiatives. Almost two-thirds of managers surveyed by Willis Towers Watson said they introduced new products last year, and 60 percent said they experienced more oversight from regulators. Seventy-four percent spent more money on technology and big data projects.

Assets in factor-based strategies, one of the most popular product launches, grew at 14.5 percent in 2017. Strategies that invest according to environmental, social and governance issues increased by 10.7 percent, less than overall growth. At the same time, 81 percent of survey respondents said they saw increased interest from clients in sustainable investing, including proxy voting.

Willis Towers Watson also found that aggregate investment management fees decreased for 27 percent of managers. Eleven percent of survey respondents reported an increase in fees.

Managers in North America represent the majority of assets, at 58.1 percent. European managers control 31.8 percent of assets and Japanese managers control 4.8 percent. The rest of the world controls 5.2 percent of assets.

Even though passive strategies grew by double digits last year, 77.6 percent of total assets are in active strategies. Over the past five years, passive has gone from 19.5 percent of the total to 22.4 percent.