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The pace race

I have been reading some interesting statistics on investment management, courtesy of the Securities & Investment Institute. The latest edition of the SII’s Investment Management Review shows the total amount of money in financial assets worldwide at the end of 2006 (the latest figures available) was $167trn – a staggering figure. This statistic comes from McKinsey & Co but the SII trawls data from a range of sources.

The Boston Consulting Group estimates $98trn of assets are under management around the world. This suggests 59 per cent of the whole are professionally managed, except there could well be some non-financial assets included in the $98trn.

Our own Barclays Global Investors accounts for $1.9trn, closely followed by State Street Global Investors. This table comes courtesy of Global Investor. That close to 4 per cent of the total is with just two firms is less interesting than the fact these leviathans derive the bulk of their assets from index-tracking vehicles. It shows how the market has changed over the years and the pace of change is accelerating. Taking more recent numbers, it would seem only two of the biggest long-term fund managers in Europe in 2005 are still among the top five. Many of the biggest European managers have seen significant outflows whereas boutique managers are climbing.

We are not talking small potatoes here. Carmignac Patrimoine, a French firm that has escaped my attention, attracted $3bn in net inflows in the last quarter of 2008 alone. Indeed, 17 of the 20 groups with the highest net inflow of funds last year began 2008 with less than $50bn – not a small amount, but it means the giants were, by and large, not among the winners. It points to specialist active managers gaining ground at the expense of traditional names.

Two-thirds of the managed money is with pension funds (the biggest group), mutual funds (just behind) and insurance companies (which lag but not by much). This leaves some impressive numbers in the private sector. No wonder banks were so keen on wealth management. When you can see the breadth of assets available, you can realise how quickly markets might move. We live in a very different world to the 1930s. Perhaps it really is more dangerous to be out than in.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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