Global investors continue to pour the majority of their capital into North American assets, according to new research from WTW’s Thinking Ahead Institute.
Results of the institute’s annual survey showed that, of the $128 trillion in assets managed by the world’s 500 largest managers as of Dec. 31, 2023, 60.8 percent of that total AUM ($77.8 trillion) was in North America—an uptick of 15 percent from the year before.
And within North America, the survey highlights a growing concentration of global AUM in the U.S., which has held a dominant position for years. In 2023, 55.5 percent of the global AUM tracked by WTW was U.S.-based, up 340 basis points from 2018 (52.1 percent) and 480 bps from 10 years ago (50.7 percent). Meanwhile, several European countries and Japan have seen their market share decline over this period.
Jessica Gao, director at the Thinking Ahead Institute, told Institutional Investor that this was not a new trend, given how large the U.S. equity market is. She also noted that a lot of those U.S-domiciled stocks are in fact global companies.
While the survey doesn’t break down asset allocation by region, data from 173 asset managers who provided relevant statistics since 2019 show that equity and fixed income remain the dominant asset classes globally, making up 77.3 percent of total AUM (48.3 percent equity and 29.0 percent fixed income). This is roughly flat (down 0.2 percent) from the previous year.
And while still accounting for a small portion of the average large manager’s portfolio (8.3 percent), alternatives saw the largest allocation growth year-over-year: up 22.4 percent in 2023). Equities (which include REITs) saw a 19.5 percent uptick in allocation. Cash holdings also grew substantially by 15.2 percent.
Meanwhile, fixed income and other assets (including infrastructure, commodities, and private debt) experienced modest increases of 8.3 percent and 13 percent, respectively.
While stocks and bonds make up for most large asset managers’ allocations, interest in the private markets remain strong.
“There’s increased attention to private equity due to these large institutional investors looking to diversify their portfolios or get that additional rate of return,” Gao said. “Large institutional investors are looking for a hedge against inflation with infrastructure and real assets.”
The research also reveals that passive investment strategies now account for more than one third of AUM among the 500 largest firms (33.7 percent) for the first time. This represents a 6.1 percent uptick in its share of investments, and a 2.9 percent decrease in active's share.
Gao pointed out that the increased growth of large passive managers, along with institutional investors' emphasis on cost control, is driving a major shift toward passive strategies. Plus, passive managers are offering more customization, such as adding factors or tilts to passive strategies or offering theme-based funds while benefiting from their scale.
That said, Gao noted that “active managers still play a significant role in the portfolio.” After all, nearly two thirds of assets managed by the world’s largest managers remain in active strategies. Plus, private equity “is almost entirely actively managed.”
