The global asset management industry is anticipated to see a stable outlook in 2025, as reported on December 5, 2024. This forecast reflects the expectation that lower interest rates and more lenient monetary policies will drive economic growth globally over the next 12 to 18 months. Improved economic conditions are expected to enhance investor confidence and increase companies' assets under management (AUM).

The financial market conditions have remained stable due to continuous global economic growth. Over the past two years, equity markets have shown significant improvement alongside sustained economic expansion, especially in the United States. The decrease in interest rates, supported by low and stable inflation levels, will likely continue this growth trend. As financial conditions ease and election uncertainties diminish in various regions, investors may take on more risk by increasing investment flows into higher-risk asset classes. However, potential trade tensions and geopolitical issues could disrupt these expectations and cause increased volatility in financial markets.

Industry revenue and margins are projected to rise due to higher AUM balances. Although traditional active managers face challenges from rising operating costs and a shift from mutual funds to lower-fee vehicles like exchange-traded funds (ETFs), the substantial increase in AUM over the past year is expected to enhance revenue and margins going into 2025. With lower interest rates contributing positively to economic momentum, investors might pivot towards higher-risk asset classes that generally offer higher fee rates.

Organic growth within the industry is also expected to improve. Despite an unlikely positive turn for traditional active mutual fund flows in 2025, rising markets and growing investor confidence should support organic growth in areas such as fixed income, ETFs, separately managed accounts (SMAs), and retail alternatives. Favorable economic conditions combined with lower interest rates create an environment conducive to increased private market asset deployments and realizations, which could lead to better private market fundraising outcomes.

Alternative managers stand to gain from a strengthening deal market in the coming year as realizations potentially increase with lower interest rates. Reduced regulation is anticipated to boost deal-making activities further. Private credit continues its upward trajectory by attracting more investor flows. Legislative sentiment shifts might allow alternative asset managers access to the previously untapped $11 trillion U.S. 401(k) retirement assets market, significantly broadening their investment opportunities.