Still, assets overseen by the industry globally have changed little over the past five years and are about $58.3 trillion, compared with $58.8 trillion in 2007, according to a September study by Boston Consulting Group. As investors have turned away from stock funds, they’ve deposited about $1 trillion into fixed income since 2007, according to data from the Investment Company Institute.
Most money is going to passively managed products, largely those that track indexes, and top-performing funds. That’s going to pose a challenge for banks seeking to expand.
“A great portion of our success will be through generating investment performance,” said Lane, the co-head of Goldman Sachs’s asset-management unit, which has amassed $856 billion.
The company’s performance has improved this year, with its mutual funds beating 62 percent of peers through Sept. 30, according to Morningstar data. About 80 percent of the bank’s total U.S. mutual-fund assets are in funds ranked by Morningstar in the top half through the first six months of the year, the firm said. The figure is 63 percent for performance over three years and 53 percent over five years.
Investors still pulled $1.6 billion from the Goldman Sachs mutual funds. That compares with $23 billion in deposits that they’ve given to JPMorgan in the same period, the data show.
JPMorgan, the largest U.S. bank by assets, has been the most successful of its peers in attracting money to its investment unit, despite returns lower than Goldman Sachs’s. That’s partly because New York-based JPMorgan has courted financial advisers and opened hedge-fund-like products that appealed to investors fleeing stock funds. The company also invested in the business as others pulled back.
JPMorgan’s mutual funds have beaten 53 percent of their respective peers this year, the Morningstar data show.
Wells Fargo’s mutual funds have attracted $4.8 billion this year through the end of September while beating about half of their peers, according to Morningstar. The San Francisco-based lender, owner of the biggest U.S. branch network, is adding foreign stock and bond strategies as part of a plan to double assets by 2020. The bank has added six funds in Luxembourg to the seven already there and is adding staff in the region, according to Niedermeyer.
“This is going to be among the most important growth areas as we see an aging demographic buying investment solutions,” Niedermeyer said.
In Europe, financial companies in a position to hold onto investment units are citing their importance to the total business. Sergio Ermotti, promoted to CEO of Zurich-based UBS last year, said he would focus on wealth management and rely on asset management as another “key element.”
The company, rescued by the Swiss government in 2008 after its investment bank racked up subprime losses, said it plans to improve performance to lure clients to its wealth-management business, now the biggest contributor to earnings.
Deutsche Bank also will need to boost performance at its money-management unit. The asset-management division had about 16 billion euros ($20.9 billion) in net withdrawals in the first half as it was unable to pitch for clients during the sale talks and as customers shied from investments amid the debt crisis.
The Frankfurt-based bank’s DWS mutual funds in the U.S. have trailed 63 percent of peers over the past five years and about 50 percent so far this year, according to Morningstar.
The asset and wealth-management unit had a combined pretax return on equity of 13 percent last year compared with 54 percent at UBS’s wealth-management unit and 17 percent at the Swiss bank’s global asset-management unit. Deutsche Bank can only reach a goal of generating an after-tax return on equity of 12 percent or more by 2015 if the asset-management, wealth- management and global transaction-banking businesses double profit, Jain told analysts Sept. 11.
“Deutsche’s asset and wealth-management business has historically underperformed and not added a lot to profit,” said Simon Adamson, an analyst with CreditSights Ltd. in London. “It won’t be easy to convince people that Deutsche now really has a long-term strategy for the business in place.”
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