Asset management got its long-anticipated rebound in 2024 and 2025, but it arrived with more grit than grace. After a choppy start, markets found their stride, pushing global assets under management (AUM) to a record $147 trillion by the end of June 2025. Most managers rode the rising tide, but fewer did so with a similar surge in profitability. Margins stayed tight as costs kept climbing. The bull market lifted asset values, but it did not lift operating leverage.
The industry continues to face a range of structural challenges including eroding revenue yields for high-fee equity mutual funds, indigestion in private markets, and operating complexity that has kept cost pressure stubbornly high.
Yet some firms are pulling ahead. Those with competitive advantages grounded in proprietary access to distribution, scaled multi-asset alternative platforms, and credible whole portfolio solutions are capturing a disproportionate share of flows.
One structural trend towers over the rest: the “great convergence” between traditional and alternative asset management. These two worlds are beginning to blend as public and private investing increasingly overlap, and as private capital managers penetrate deeper into wealth, defined contribution, and insurance channels. This convergence is showing up in dealmaking and partnerships across the public/private divide and through innovations such as semi-liquid products, evergreen funds, and public–private model portfolios. Two companion trends are supplementing the shift. First is a reassertion of home country bias as investors rotate from global to local exposures. Second is the rapid growth of active exchange-traded funds (ETFs). Collectively, these trends could create between $6 trillion and $10.5 trillion of “money in motion” over the next five years.
This year’s report delves into the following five themes:
- Records, but not rapture: An uneven recovery—with considerable variations across regions, channels and product types.
- Margins under pressure: Assets up, profits stuck—a widening gap between revenue and profitability due to the compounding costs of complexity.
- From alpha to access: Who grew and why—diverging performance of managers based on business models and capabilities.
- Status quo disrupted: Three trends that could reshape the industry—$6 trillion to $10.5 trillion that could be unlocked from the reassertion of home country bias, the structural shift toward active ETF adoption, and the convergence between traditional and alternative asset management.
- Resilient growth on rewired platforms: An agenda for thriving in a new era—five strategic priorities for building durable, profitable growth engines in this rapidly evolving environment.
Records, but not rapture: An uneven recovery
2024 was a breakout year for the asset management industry. Global AUM hit $135 trillion—up $15 trillion, the largest single-year rise of the decade (Exhibit 1). Roughly 70 percent of the increase came from the markets, as equity valuations surged. The remaining 30 percent was net new money, reflecting renewed client demand across a variety of channels and strategies.
Organic growth rose to 3.7 percent, up from 2.1 percent in 2023 and at the top end of the industry’s long-run 3–4 percent range.
Still, gains were clustered by region, asset class, and client type, setting the stage for a more competitive and segmented growth environment in 2025 and beyond.
Net flows surged across regions
Year-on-year net flows for 2024 climbed for every region—2.4 percent in the Americas, 2.5 percent in Europe, the Middle East, and Africa (EMEA), and a standout 8.4 percent in Asia–Pacific. Trajectories of growth varied as well, with real acceleration coming from Europe and Asia: Europe’s net flows were nearly three times 2023 levels; Asia’s nearly doubled.
Households do the heavy lifting
Individual investors were the rainmakers of 2024. Wealth, defined contribution (DC), and insurance clients accounted for more than 80 percent of total global net flows in 2024—a familiar trend that is quickening.
Within the wealth segment, rising asset values, strong wage growth, and low unemployment kept new money flowing. High-net-worth investors reallocated across public and private markets, showing growing appetite for custom portfolio solutions. DC flows benefited from the long, secular shift away from defined benefit. Insurance added heft on the back of record annuity sales and more outsourcing of general account assets.
The barbell, redesigned
The asset management industry has long been described as having a barbell dynamic: that is, with growth flowing to both passive strategies and alternatives, while the middle ground shrinks. But 2024 was defined by a new barbell: passive equity and active fixed income.
In equities, the divide between passive and active strategies deepened. 2024 flows into passive equity accelerated sharply, fueled by demand for low-cost beta exposure, integration into model portfolios, and continued allocation from wealth platforms. Active equity continues to bleed, particularly in mutual funds, where fee pressure, tax inefficiency, and benchmark underperformance weighed down the category.
Active bond strategies were the year’s standouts; multisector, ultrashort, and intermediate in particular were rewarded as interest rate expectations steadied and flexibility in managing credit and duration risk were rewarded.
Flow behavior across active strategies mirrored performance. The share of active equity funds outperforming their benchmarks declined. In contrast, the share of outperforming active fixed-income strategies grew. One notable exception within equity was large-cap growth. This segment, a consistent underperformer in 2021 and 2022, showed signs of life, as managers increasingly leaned into AI-linked investment theses.
Private markets in a period of indigestion
After peaking at nearly $1.7 trillion in 2021, global private markets’ fundraising slid to roughly $1.1 trillion in 2024—a return to 2017 levels. The slowdown was broad, but most pronounced in private equity and real estate where exits stayed muted.
Private credit and infrastructure decelerated far less than private equity and real estate. Credit continues to benefit from the refinancing of sponsor portfolios as well as new areas of demand such as asset-backed finance and infrastructure lending. Infrastructure offers both inflation-protected, long-dated yields and exposure to a broadening range of “new economy” assets, such as data centers.
Private wealth channels and secondaries have proved to be a bright spot in the industry. In private wealth, evergreen vehicles and semi-liquid fund structures have gained substantial traction among high-net-worth and affluent investors. In the United States, these vehicles grew to $348 billion in AUM and attracted $64 billion in inflows in 2024. Secondaries are now a critical release valve, with global AUM above $700 billion and roughly $130 billion raised in 2024. Together, flows from private wealth and secondaries are now injecting meaningful new capital into the ecosystem, backfilling an estimated 15 to 20 percent of the annual fundraising shortfall compared to 2021, according to our analysis.
How long will it take to work through the overhang of unsold portfolio companies? Our latest limited partners’ (LP) soundings stay constructive, with institutional investors signaling plans to grow allocations in the medium term. Assuming a gradual recovery in distributions, deployment activity, and average allocation increases, we estimate that it may take close to three years to fully digest the capital backlog and return to more “normal” fundraising cycles.
2025 has been steady but not spectacular
The current year has been softer, though solid. By June 2025, global AUM reached $147 trillion, with an organic growth rate of 2.2 percent over the same period.
Flows have moderated across regions. The Americas stood at 1.2 percent organic growth rate through June compared with a year ago; Asia–Pacific was at 4.2 percent. EMEA appears on track for a banner year, with a 2.6 percent organic growth rate, edging past the region’s 2024 mark of 2.5 percent.
In the United States, open-ended fund flows were down about 22 percent through June 2025 versus 2024, but excluding April’s volatility, the gap shrinks to about 11 percent. April's disruption—driven by bond market jitters and policy uncertainty—hit fixed income hardest. Passive equity held steady. Retail investors bought the dip, and the trend of outflows from active and inflows into passive continued. The barbell remains intact.
Margins under pressure: Assets up, profits stuck
For the second year running, double-digit top-line growth failed to produce meaningful operating leverage. Revenues rose by double-digit percentages, but margins inched up by roughly one percentage point, half the lift seen in past years with comparable gains in AUM and revenue (Exhibit 2).
Costs continue to climb
The industry’s total cost base rose to $167 billion in 2024, marking a $12 billion increase versus 2023—a 7 percent jump versus the 5 percent average annual rise since 2020. Every cost category grew, but the largest increases came from technology (+9 percent), investment management (+8 percent), and distribution (+8 percent).
Many asset managers continue to operate on aging infrastructure that is expensive to maintain, and the absence of well-integrated systems has made supporting core operations costlier and stymied innovation with newer technologies like generative AI.
The expanding operating model sprawl within many asset managers’ organizations has compounded cost increases. As firms expand across asset classes, wrappers, channels, and jurisdictions, many have chosen to add headcount rather than to clean-sheet processes. The result: From 2020 to 2024, headcount grew sharply in roles created by new levels of complexity. For example, product specialists increased by 60 percent, operations professionals by 30 percent, and business management roles by 16 percent.
A notable increase in fixed compensation across the industry compounded the expansion in this specialized headcount. Our proprietary data shows that, indexed to 2020, fixed compensation per FTE has risen by more than 25 percent.
From alpha to access: Who grew and why
We analyzed the financial and operating results of about 50 of the largest traditional and alternative asset managers to identify the characteristics of firms that consistently generated the most substantial net flows and revenue growth. We found that organizations that achieved above-average results in both dimensions fell in three broad archetypes:
- Firms with access to proprietary distribution: Their structural access to client channels and end-client relationships provided resilience against market volatility and enabled superior pricing and servicing economics.
- Firms with scaled manufacturing platforms: Those that were able to offer a full breadth of portfolio building blocks to deliver solutions at the level of the whole portfolio.
- Large multi-asset-class alternative managers: Firms that were able to serve multiple portfolio sleeves within institutional and high-net-worth client portfolios1; also benefiting from early investments in permanent access to insurance platforms, as well as private wealth distribution capabilities.
At the same time, our research also identified three distinct profiles of firms that underperformed, falling behind on both revenue and organic growth metrics:
- Firms dependent on active equity—especially in mutual fund vehicles: These firms continued to experience structural outflows as clients rotated toward lower-cost passive strategies and newer, more tax-efficient wrappers like ETFs and SMAs.
- Fixed-income specialists lacking differentiated capabilities: Although fixed income saw renewed investor interest in 2024 and early 2025, firms without distinct strategies—such as those in private credit, securitized assets, or dynamic duration—struggled to capture flows.
- Firms concentrated in slow-growth institutional channels—especially defined benefit pensions: Managers focused heavily on the DB pension market face structural stagnation. As plans mature and de-risk, net new inflows have become scarce.
Status quo disrupted: Three trends that could reshape the industry
The old engines of advantage—distinctive investment performance and broad distribution access—are no longer guarantees of market leadership. Conventional growth is still there for those who are diligent; outsized growth, though, will come only from stepping beyond the usual borders, marrying portfolio construction shifts with product innovation and new ways of meeting client demands.
Three trends have the potential to put significant money in motion across the industry over the next five years driven respectively by shifts in geo-economics, product structures, and industry structure:
- A recalibration toward local-for-local investing, as a new desire for geographical diversification and onshore strategies potentially slows a decade-long drift toward US-based assets and global manager positioning.
- The mainstreaming of active ETFs, which are redefining how active management is accessed, distributed, and scaled.
- The convergence of traditional and alternative asset management, as clients seek unified portfolio solutions across public and private markets, and the democratization of alternatives forges new partnerships.
Our research suggests that these three trends have the potential to unleash between $6 trillion and $10.5 trillion of money in motion over the next five years (Exhibit 3).
Home cooking makes a comeback
The United States has long played an outsized role in global investors’ portfolios because of its importance in global capital markets. As of 2024, the United States accounted for roughly 70 percent of global equity market capitalization and 30 percent of global fixed-income markets. This scale has helped US asset managers consistently attract more capital—both domestically and internationally—especially into US-based strategies. Outside a few local leaders in EMEA and APAC, US firms have outpaced competitors.
There are early signals that the drumbeat may be changing. Some allocators have recently signaled an intent to reduce US exposure across public and private markets, citing policy uncertainty, macro divergence, and currency risk. The June 2025 Bank of America Global Fund Manager Survey shows US equity overweight positions at multi-year lows. McKinsey’s May 2025 LP Survey also shows more institutional investors eyeing private equity and real estate outside the United States. A weaker dollar has further dented returns for non-dollar investors.
Just how much have these intentions translated into action? Our analysis of open-ended fund flows for both US and European investors from 2024 through the second quarter of 2025 paints a nuanced picture. European investors did pull back sharply from US strategies in the second quarter of 2025. However, US investors largely held their domestic stance, with only marginal equity outflows.
A longer 18-month view shows that the quantum of outflows in the second quarter of 2025 more or less matched the spike of inflows for both US- and European-based investors in the third and fourth quarters of 2024.
Two conclusions can be reached from this. First, the evidence to date points to a tactical reset, not a structural rotation. Second, regional divergences in investor behavior hint at an opening of a window of opportunity for “local-for-local” asset gathering, particularly in Europe. Whether this shift is sustained over the long term depends on a host of factors including the long-term economic outlook of the United States relative to other economies, US fiscal and trade policies, currency movements, and the availability of comparable investment alternatives in other markets. Even so, a 1 percent shift away from US assets implies $1 trillion on the move. US managers cannot afford to take their historical momentum in international markets for granted and will need to consider partnerships, joint ventures, and localized build-outs to stay competitive abroad.
From share class to shelf space: Active ETFs go mainstream
2025 marks the coming of age for active ETFs. In the past five years, more than 1,400 launched, outpacing both passive ETFs and mutual funds. According to Morningstar data, there are now roughly as many active ETFs as there are passive ETFs. Active ETFs represent only 7 percent of overall ETF AUM in 2024, yet they captured 37 percent of ETF flows and nearly 24 percent of ETF-driven revenues in 2024.
We estimate that around half of active ETF flows represent substitution from legacy vehicles—primarily mutual funds—while the remaining is driven by new demand for active strategies, sometimes at the expense of passive allocations. Supporting this, McKinsey’s 2025 Financial Advisor Survey shows that roughly 60 percent of active ETF allocations come from active mutual funds, with the balance sourced from passive equity, individual securities, cash, or new inflows. Similarly, among the top 100 active ETFs, about 60 percent of inflows go to converted or cloned mutual fund strategies, while 40 percent target new or differentiated exposures.
The great convergence of traditional and alternative
The border separating traditional and alternative asset management is dissolving. What began as two distinct tribes—benchmark-oriented, public market–focused houses on one side; and illiquid, alpha-hunting private markets shops on the other—is fast becoming a single competitive arena. In the old order of the two, traditional managers manufactured active and passive open-ended funds for individual investors while alternative managers sought out sophisticated institutions to bankroll drawdown funds. That bifurcation has ended (Exhibit 4).
Clients are driving the convergence. They want integrated solutions that blend public and private exposures in a coherent package. Insurers, for instance, are pushing deeper into private markets; and high-net-worth investors want access to private assets that once were the sole preserve of large institutions. Regulation frameworks and product vehicles have evolved to ease the convergence. Pursuing these new opportunities requires a blended set of capabilities that many managers have found challenging to build on their own: Alpha generation in illiquid asset classes exists within alternative managers, while the product and pipes for broad-based distribution sits with traditional managers. Few have managed to build the other missing half organically. Hence the rush to partner, buy, or be bought—as the operating logic of the great convergence across traditional and alternative business models takes shape.
2024 and 2025 marked an inflection point in this trend of convergence. Product innovation sped up: public–private strategies, evergreen products, and public–private model portfolios proliferated. With recent policy changes in the United States, DC plans are also in an early phase of experimentation—from in-plan annuities to new uses of target-date funds that incorporate private markets. M&A activity surged in both directions: traditional managers acquired alternative investment capabilities, while alternative managers acquired traditional asset managers for the distribution and product capabilities.
This is just the opening act of the great convergence. The industry’s giants have led the charge in forming strategic partnerships and stitching together integrated offerings. There is still a long tail of smaller managers that lack the resources to compete at scale across both domains. These firms may benefit the most from this convergence, but they have yet to partner their way into meaningful capability sets. Scale is optional; access is not. Hence the industrial logic of convergence will continue to play out at pace.
The great convergence is playing out most prominently in the democratization of the private markets. Democratization began with ultra- and high-net-worth clients through closed-end vehicles, feeder funds, and co-investments. It then expanded to accredited investors with the emergence of semi-liquid funds. Now, it is reaching the mass affluent through public–private products open to non-accredited investors, with defined contribution plans as a plausible next stop through innovations in target-date funds.
In the near term, we expect the largest and most immediate growth opportunity to reside in the high-net-worth and affluent segments because of their large asset pools and relatively low current allocations to alternatives. Mass affluent growth will depend on brokerage access. The DC channel offers long-term potential but is more complex and will likely be slower to scale. Regulation has begun to evolve, but multiple stakeholders (including recordkeepers, consultants, plan sponsors, and participants) will need to be convinced, and monthly contributions will take time to accumulate.
In wealth, traditional managers have long lagged behind alternatives in capturing the convergence opportunity, but the gap is narrowing. Blue-chip alts were early movers, investing heavily in distribution and client engagement, but many traditional firms are catching up—often via M&A and by leaning on scaled platforms and whole-portfolio support. While alternative managers often win on perceived performance, traditional firms are differentiating on execution, relationship depth, and cost-efficiency. Advisors increasingly cite proactive outreach, portfolio construction support, and practice management as key reasons they trust traditional firms. With advisors consolidating relationships, the most embedded and broad-based traditional managers are well-positioned to lead in the next phase of convergence.
Resilient growth on rewired platforms: An agenda for thriving in a new era
With money-in-motion rising across client types and asset classes, firms need to think differently about growth. To thrive amid macroeconomic uncertainty and business model disruptions, managers can pursue a five-part agenda:
- Smarter strategic partnerships: Partnerships—whether they involve retail distribution access to permanent capital vehicles, or access to asset origination and cross-border joint ventures—are becoming mission critical. They offer rapid scale, reach, and access to high-growth markets. The logic is strongest in private markets (for example, midsize managers will benefit from the ability to “rent” costly distribution required to access the wealth segment) and for US firms expanding abroad.
- Digital-enabled distribution: The new playbook blends digital engagement, portfolio advisory, and mass personalization. AI-driven insights can target prospects, tailor proposals, and fundamentally reimagine how clients are engaged—which are vital for traditional firms carrying heavy fixed costs and for alternative managers just entering the distribution arms race.
- Products as portfolio solutions: As portfolios become more complex and investors look for outcome-oriented portfolios, product innovation is a must. Future product teams will need to build modular, vehicle-agnostic solutions that fit model portfolios, hybrid wrappers, and evergreen strategies. Rapid iteration of wrapper innovation can unseat incumbents and win shelf space faster.
- Rewired investment engines: A new wave of innovation is emerging across investment organizations, fueled by AI and agentic technologies that are changing how research is synthesized, portfolios are customized, and unstructured data is converted to insight.
- Scalable technology and operations platforms: Operating leverage is the native superpower of industry leaders; too many firms have scaled costs instead. The fix: ruthless simplification, standardization, and decommissioning, often enabled by AI.
After years of strain, the asset management industry has rebounded and is on a trajectory for growth. Yet, challenges remain—most notably the loss of operating leverage and the widening gap between industry leaders and the rest. Growth through the money-in-motion opportunities is very real, but they depend on new capabilities that many individual managers will struggle to build on their own. Capturing the opportunities—particularly ones coming out of the great convergence—will require bold partnerships, decisive re-platforming, and a willingness to rewrite traditional playbooks.
