2023全球财富和资产管理报告：人工智能的临界点-摩根士丹利

Morganstanley

RESEARCH

BluePaper

Asset&WealthManagement

TheAITippingPoint

GenAIwilltransformthewaytheindustryoperates,butitisjustonepartofanintegratedstrategicapproachtodrivegrowthandbuildresiliency.

OliverWymanisagloballeaderinmanagementconsulting.Formoreinformation,visit.

OliverWymanisnotauthorizedorregulatedbythePRAortheFCAandisnotprovidinginvestmentadvice.OliverWymanauthorsarenotresearchanalystsandareneitherFCAnorFINRAregistered.

OliverWymanauthorshaveonlycontributedtheirexpertiseonbusinessstrategywithinthereport.OliverWyman’sviewsareclearlydelineated.

ThesecuritiesandvaluationsectionsofthisreportaretheworkofMorganStanleyonlyandnotOliverWyman.

FordisclosuresspecificallypertainingtoOliverWyman,pleaseseetheDisclosureSectionlocatedattheendofthisreport

MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestment

decision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

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Authors

MORGANSTANLEY

BetsyL.Graseck,CFA1

EQUITYANALYST

+12127618473

Betsy.Graseck@

MichaelJ.Cyprys,CFA,CPA1

EQUITYANALYST

+12127617619

Michael.Cyprys@

BruceHamilton2

EQUITYANALYST

+442074257597

Bruce.Hamilton@

AndreiStadnik,FIAA3

EQUITYANALYST

+6129770-1684

Andrei.Stadnik@

GiuliaAuroraMiotto,CFA2

EQUITYANALYST

+442074255344

Giulia.Aurora.Miotto@

ConnellJ.Schmitz1

RESEARCHASSOCIATE

+12127616252

Connell.Schmitz@

StephanieMa1

RESEARCHASSOCIATE

+12127613552

Stephanie.Ma@

OLIVERWYMAN

JoshuaZwick

PARTNER

+19178469483

Joshua.Zwick@

KamilKaczmarski,CFA

PARTNER

+496997173573

Kamil.Kaczmarski@

JoãoMiguelRodrigues

PARTNER

+493039994558

Joaomiguel.Rodrigues@

AdamKhadra

PRINCIPAL

+447585880287

Adam.Khadra@

JoseEibar

PRINCIPAL

/p>

Jose.Eibar@

LukeHutchinson

ENGAGEMENTMANAGER

+16462415081

Luke.Hutchinson@

NancyHuang

ASSOCIATE

/p>

Nancy.Huang@

1MorganStanley&Co.LLC

2MorganStanley&Co.Internationalplc+

3MorganStanleyAustraliaLimited

4MorganStanleyAsia(Singapore)Pte.+

5MorganStanleyMUFGSecuritiesCo.,Ltd.

6MorganStanleyAsiaLimited

7MorganStanley&Co.Internationalplc,SeoulBranch

8MorganStanley&CoInternationalplc(DIFCBranch

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

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Contributors

MORGANSTANLEY

OLIVERWYMAN

NickLord3

ChristianEdelmann,CFA

JohnLester

EQUITYANALYST

PARTNER

PARTNER

Nick.Lord@

Christian.Edelmann@

John.Lester@

MiaNagasaka5

HuwvanSteenis

DavidWaller

EQUITYANALYST

PARTNER

PARTNER

Mia.Nagasaka@

Huw.Vansteenis@

David.Waller@

RichardXu,CFA6

MagnusBurkl,CFA

RandyLampert

EQUITYANALYST

PARTNER

PRINCIPAL

Richard.Xu@

Magnus.Burkl@

Randy.Lampert@

JoonSeok7

BradleyKellum

RichardShepherd,CFA

EQUITYANALYST

PARTNER

SENIORRESEARCHSPECIALIST

Joon.Seok@

Bradley.Kellum@

Richard.Shepherd@

VishalShah1

PhilipSchroeder

KarenYeung

EQUITYANALYST

PARTNER

CONSULTANT

Vishal.Shah6@

Philip.Schroeder@

Karen.Yeung@

RyanKenny,CFA1

JasperYip

LilyStein

EQUITYANALYST

PARTNER

CONSULTANT

Ryan.Kenny@

Jasper.Yip@

Lily.Stein@

MarinaMassuti2

AllwynBarreto

BradlyD’Alessandro

RESEARCHASSOCIATE

PARTNER

RESEARCHANALYST

Marina.Massuti@

Allwyn.Barreto@

Bradly.DAlessandro@

AnnaleiDavis1

RainerGlaser

RESEARCHASSOCIATE

PARTNER

Annalei.Davis@

Rainer.Glaser@

1MorganStanley&Co.LLC

2MorganStanley&Co.Internationalplc+

3MorganStanleyAustraliaLimited

4MorganStanleyAsia(Singapore)Pte.+

5MorganStanleyMUFGSecuritiesCo.,Ltd.

6MorganStanleyAsiaLimited

7MorganStanley&Co.Internationalplc,SeoulBranch

8MorganStanley&CoInternationalplc(DIFCBranch)

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

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4

Contents

5

ExecutiveSummary

9

1.StateoftheIndustry

16

2.Gettingonthe'Right'Sideofthe'BigSort':AssetManagers

30

3.TakingtheSteeringWheelonDrivingGrowth:WealthManagers

37

4.TheGenAIRevolutionandWhatItMeansforAssetandWealthManagers

53

5.MessagesfromOurProprietarySurvey

55

Disclosures

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ExecutiveSummary

Despitethemarketreboundin2023,theassetandwealthmanage-mentindustriesarestillfacingalong-termshiftinthemacroeco-nomicenvironment.Fornearly15yearssincetheGlobalFinancialCrisis,aperiodoflow,stableinflationandstrongmarkets,buoyedbysupportivemonetaryandfiscalpolicies,reignedovermostofthedevelopedworld.Thisgoldilocksperiodwasdisruptedin2022,whencentralbanksaggressivelyraisedinterestratestotameinflation,leadingtoasimultaneouspullbackinequityandfixedincomemar-kets.Thecontinuedshifttowardprotectionism,nationalism,andmultipolarityhasfurtherexacerbatedthesemacroeconomicchal-lenges,usheringinaworldordercharacterizedbymorerestrictivecentralbanks,lessfiscalflexibility,andgreatergeopoliticalinsta-bilitythatwilllikelytakeatollonglobalgrowthandwealthcreation.

Giventhesemacroheadwinds,ouroutlookfortheassetmanage-mentindustryistempered.Weforecasttotalexternallymanagedassetstogrowat7%from2022to2027,oramorenormalizedrateof3.6%whenmeasuredfrom2021,drivenmainlybyprivatemarkets.Coreactiveisexpectedtocontinuetoloseshare,especiallytopas-sivestrategies,whiletherecentrapidgrowthinmoneymarketsshouldslow,assumingthebulkofinterestrateincreasesarebehindus.Feecompressionissettocontinue,particularlyamongtraditionalassetclasses,albeitatamoderatedpace.Asaresult,weprojectindustryrevenuetogrowataslightlyslowerpaceof5.2%versus7%ofAuMforthesameperiod,butwithapronouncedshifttowardpri-vatemarketsandselecthedgefundstrategies,whichwillconstitutemorethanhalfofthetotalrevenuepooloftheindustryby2027.Weexpectretail/wealthgrowthtocontinuetooutpaceinstitutionalat7.9%vs.5.5%,propellingittoover60%ofglobalthird-partyman-agedAuMby2027.

Weforecastglobalhouseholdfinancialwealthtogrowat6%from2022to2027,ledbyAPACandtheMiddleEast,aswellastheultra-highnetworthindividual(UHNWI)segment.Afterthelongbullmarket,thewealthmanagementindustryisnowencounteringamorechallengingmarketenvironment,withstructuralheadwindshittingboththerevenueandcostsides.Therecentdecreaseinreve-nueshasbeenlargelydrivenbydropsinAuMandloanvolumes,aswellasasignificantreductionintransactionvolumesasclientshavepulledbacktradingactivitiesrelativetotheelevatedlevelsduringCOVID-19.Thisrevenueslowdown,combinedwithstrongwageinfla-tiondrivingcostsup,hasintensifiedprofitabilityheadwinds.

Despitetheseheadwinds,weexpectthattheassetandwealthman-agementindustrieswillcontinuetobeamongthemostprofitableinthefinancialservicessector,generatingrelativelyattractivereturnsonequity(RoE).However,thecombinationoflowertoplinegrowthandastubbornfixedcostbasethatthreatenstorisefasterthanrev-enuehighlightsthefragilityoftheindustries’operatingmodel,whereeveryfuturemarketdownturnwillbethatmuchmorepun-ishing.

Inworkingwithleadingassetandwealthmanagersaroundtheglobe,aswellasinourinterviewswithseniorindustryexecutives1wecon-ductedtohelpinformthisreport,onethinghasbecomeclear,however:Leadingmanagersareembracingthesechallengesandusingthemtogalvanizetheirfirms’commitmenttoreexaminingtheirstrategies,reimaginingtheiroperatingmodels,andembracingnewcapabilitieslikegenerativeartificialintelligence(GenAI)todrivevalueandbuildresiliencyintheirbusinesses.

Assetmanagers:Gettingonthe“right”sideofthe“BigSort.”Threeactionstodriveprofitablegrowthandoperationalresil-iency

Thecombinationofpersistentstressonassetmanageroperatingmodels,thefadingofmacroeconomictailwindsthathavebenefittedallfirms,andrevolutionarychangesbeingusheredinbyGenAIhascreatedconditionsthatwillraisethecompetitivebarandprompta“BigSort,”causingalargegaptoemergebetweenleadersandlag-gards.Theleaderswillbethosethatnotonlyinvestinandpositiontheirbusinessestotakeadvantageoffaster-growingareas,butalsotakeasetofspecificactionstodriveprofitablegrowthandbuildoperationalresiliency.Specifically:

1.Fueltheactivemanagementenginetowinshare:Weseealargeopportunityforactivemanagerstocapturesharefromflowsamongactivelymanagedfunds,whichweesti-matetobe3xthatofflowsfromactivetopassive.Whiledeliveringinvestmentoutperformance(i.e.,performancealpha)willremainacriticaldriverofflows,itisnottheonlyone:Managersthatcandeliversourcesof“alpha”viaproductinnovation,distributionandservice,andfeestructureswillalsobeabletowinshare.

1Wewanttothanktheindustryexecutiveswhoagreedtobeinterviewedforthisreport,whosefirmscollectivelymanageandadviseonover$21trillioninassets.Theircommentsprovidedvaluableperspectivesandinsightsthathavehelpedinformandvalidatetheviewsexpressedherein.

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2.Optimizepricingtocapturemoreoftheeconomicsintheinstitutionalsegment:Feepressure,mostnotablyontradi-tionalstrategies,hasbeenrelentlessasinstitutionalinves-torscontinuetoswitchcoreexposurestopassivewhileconsolidatingthenumberofmanagerstheyutilize,givingthemadditionalleveragetonegotiatelarger,volume-basedfeediscounts.Managersarenothelpingthemselves,withmanyhavinglargepricingdispersionsacrosstheirmanagedaccounts,leadingtomassiveprofitabilityskews.Weseesig-nificantrevenueuplift,ontheorderof$50millionforatyp-ical$500billioninstitutionalmanagerforthosethatadoptamoredisciplinedandrobustpricingframework.

3.Resettheoperatingmodeltobuildresiliencyandprovideaplatformforgrowth:Weseefourprimarysetsof“levers”thatassetmanagerscanpulltoimproveoperatingmarginsandfreeupresourcestoinvestingrowth:de-scoping,organi-zationaleffectivenessandsimplification,workforcemanage-ment,andthird-partycostmanagement.Manyassetmanagershaveannouncedcostsavingtargetsof5-15%.Indeed,wecontendthatassetmanagersadoptingmoreaggressivestrategiescanachievecostsavingsof20-40%bymakingdifficultchoicestotrimtheirstructuralcostbase,andbyembracinga“virtual”model,relyingmoreonremoteworkandtechnologytopowerthebusiness.

Twoplaysforwealthmanagerstounlocknetnewmoneyanddriveprofitablegrowth

Forwealthmanagers,weseetwogroupsofinitiativesthatcanunlocknetnewmoneyanddriveprofitablegrowth:

1.CracktheWM–CIBenigmatowinwithkeyclientsegments:

FamilyOfficeandEntrepreneurs&Executives:Thesesegmentsrepresentarevenueopportunityofover$200billionforwealthmanagerswhocanofferapropositionthatcombineswealthmanage-ment(WM)withcorporateandinvestmentbanking(CIB)products.Familyofficesservecomplexinvestmentneedsandrequirecustom-izedinvestmentsolutions,aswellasaccesstoexclusiveinvestmentopportunities.Entrepreneursandbusinessowners,whomakeuphalfofHNWIsglobally,haveuniquefinancialneeds,combiningbusi-nessandpersonalneeds.SuccessfulcollaborationacrossWMandCIBiskeytowinninginthesesegments.Jointcapabilityandcoverageteamsthatholisticallyaddressclientneedsarethemosteffectiveapproach.

2.Elevatecapabilitiestocaptureagreatershareofnewmoney:

WorkplaceWealth:Estimatedat$35-50trillioninassets,themodernworkplacepresentsasignificantopportunityforwealthmanagerstogain“earlyaccess”toagoldmineofretailclients.Oncetheworkplacerelationshipisestablished,wealthmanagerscanaimatthewholeclientrelationshipthroughitsretailwealthmanage-mentarm.Advisingondefinedcontribution(DC)assetsrepresentsarevenueopportunityof$70-100billionon$16trillionassets,andalsotheopportunitytoadviseon$15-25trillionassetsheldawaybyparticipants.Stockrecordkeepingcanbeadifferentavenuetothesamedestiny:Byrecordkeepingpartofthe$6-8trillionvestedandunvestedassetsworldwide,wealthmanagerscanalsoaimtoadvisethe$15-25trillionassetsheldawayoftheworkplace.Whileinitsearlystages,providingliquiditytoprivatestockholdersaccountedfor$60billionintransactionvolumeinthelastfouryears,andcanbedifferentiatingforwealthmanagerswithinvestmentbankingcapabilitiestargetingprivatefirms.

“Moneyball”foradvisorgrowth:IntheUSalone,advisorsswitchingemployersrepresent$2-3trillioninassetseachyear.Withthepoten-tialofbringing$120billioninnewassetseveryyear,wealthman-agersadoptingadata-drivenapproachtoenhancetheiradvisorrecruitmenteffortscanbuildasignificantedge.Byfocusingonthreekeyareas—establishingtherightambition,prioritizingtherightadvisorcohorts,andfocusingontherightmarkets—wealthman-agerscanimprovetheeffectivenessoftheirrecruitingefforts.

TheAI“TippingPoint”andtheRiseoftheGenerativeAI(GenAI)Machines

GenAIisn’taseparategrowthdriverinitself.Ithasthepotentialtosuperchargeefficiencygainsacrosstheoperatingmodel,whichcanfreeupevenmoreresourcestoinvestinprofitablegrowthareas.WhilethetechnologyunderlyingGenAIhasbeenaroundforseveralyears,webelievewearenowata“tippingpoint”intermsofitsability

tobedeployedonawidespreadbasisacrossassetandwealthman-agers.

AIUsageRisks

Dataprivacy

Improperly

trainedmodels

Difficulty

controllingoutputs

Observability

ofinteractions

Copyright

concerns

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Exhibit1:AITippingPoint

Higherdegreeofaccuracythan

previousgenerationsofnatural

languageprocessing(NLP),able

tobetterunderstandandgeneratesophisticatedlanguagethanearlierAIsystems

Generalityofapplication:BroadrangeofGenAIapplications,

spanningacrossindustries,

businessfunctions,andcapabilities

AIcapabilities

Betteraccessibilityandeaseof

use:GenAIapplicationshaveahighdegreeofaccessibilityanduser-

friendlyinterfaces,withnotechnicalbackgroundrequiredtoeffectivelyutilizeandbuildtools

Source:OliverWyman

Whileexperimentationandpilotingarewidespread,leadersarealreadydeployingandextractingtangiblebenefitsfromGenAI

FirmsthathavealreadysuccessfullyimplementedGenAIsolutionshavefocusedonareaswhereithasthegreatest“fit”potential,namelywherethereisabundantinformationtointerpretandsynthe-size,aneedtogeneratemoderatelycustomizedorcreativecontent,andwheretheactivitiesinvolveroutinetasks.Whenproperlydeployed,GenAIcanleadtosignificantproductivitygainsacrossthevaluechain.Whileitisstillquiteearlyintheadoptionofthistech-nology,ourestimatesofpotentialproductivitygainsreflectviewsofindustryexecutivesontheexpectedbenefitsoffullyramped-upAItoolsovertime.WeexpecttheseinitialestimatestoevolveasmoreassetandwealthmanagersadoptAIatscaleandtherangeofbene-fitsbecomeclearer.Ourcurrentresearchsuggeststhefollowing:

Insalesandclientservice,GenAIcanenhancesalesoradvisors’abilitytoengageexistingclientsandenablebetteridentificationandconversionofprospectiveclients.Byfreeinguptimespentonadmin-istrativetasks,helpingpreparemorecustomizedinsightsaboutcli-entsandtailoredanswerstoinquiries,weestimatethatGenAIcanleadtopotentialproductivitygainsof30-40%forsalesandadvisors.

Inproductdevelopment,GenAIcanaccelerateroutinetasks,suchasreportdraftingandmarketresearch,potentiallyenhancingpro-ductivityforassetmanagersby25-35%andallowingforfastertimetomarketwithproductsbettertailoredtomarketdemand.

Ininvestment&research,GenAIcanempowerportfoliomanagersininvestmentresearchandriskanalysisbyreplacinginformationcol-

lection,summary,anddatacleaningtaskswithhigher-valuevalida-tionandideagenerationactivities,resultinginupto30%productivitygains.

Formid-&back-officefunctions,GenAIcanimproveefficiencyforlegal,compliance,andoperationaltasks,anddemocratizeabilitytocode,saving25-50%ofemployeetime.

TheinitialfocusforGenAIisoverwhelminglyondrivingefficiencygainsoverdirectlyexpandingnewrevenuestreamsordrivingalpha.PartofthereasonforthisisthatefficiencygainshelptodelivertheincrementalbudgetforAI.Itisimportanttonote,however,thateffi-ciencygainsfreeuptimeandresourcesthatcanbereallocatedtohigher-valueactivitiestosupportrevenue-generatingactivities,enablebetterinvestmentdecisions,orimproveclientengagementandexperience.Aspartofgeneratingtheseefficiencygains,firmshavenot(yet)beenutilizingGenAItoreplaceresources.Rather,thetechnologyhasbeenusedasmoreofacopilot,oratoolthatenhanceshumancapabilities,oftenbyshiftingthebalanceofactivi-tiesawayfrombasiccontentcreationandsynthesizingtoreviewing,validating,andfurthercustomizingoutputs.

ThetransformativepowerofGenAIdoesn’tcomewithoutrisks

Some10yearsago,thefamousphysicistStephenHawkingsaid,"SuccessincreatingAIwouldbethebiggesteventinhumanhistory.Unfortunately,itmightalsobethelast,unlesswelearnhowtoavoidtherisks.”AsthedeploymentofGenAIbecomesincreasinglypreva-lent,organizationsmustcarefullyassessandmitigatetheuniquerisksandlimitationsinherentinthetechnology,whichfallintotwomaincategories:“technological”and“usage.”

Exhibit2:AITechnicalandUsageRisks

Traceability

Threatof

cyberattackandfraud

AITechnologicalRisks

Hallucination

Source:OliverWyman

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Adoptaholisticorsystems-basedapproach

Evolvetalentstrategyanddeveloprightteamingmodels

Striketherightbalanceofin-housecapabilitiesandoutsourcing

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ResponsibledeploymentofGenAItoolsrequiresthatallstake-holdersunderstandthatGenAIisacapabilityinneedofsignificantoversight.Sofar,theindustryseemstoberespondingtothesechal-lenges,withmanyfirmsmaintaininga“human-in-the-loop”approachtoAIadoption—wherebyahumanisinvolvedinthedeci-sion-makingprocessalongsideAI,sothatAIoperateswithhumanoversight,intervention,andvalidation.

FirmsthatwillbenefitmostfromdeployingGenAIintheirbusi-nesseswillsatisfysevenkeysuccessfactors

SuccessfulimplementationofGenAIrequiresathoughtfulandstra-tegicapproachbyassetandwealthmanagerstomaximizeimpactandmanagerisks.WehaveidentifiedsevenimperativesformanagerstoeffectivelyharnessGenAI'spotential.Someoftheseweseeas“tablestakes”—firmslookingtogetanymeaningfulbenefitfromdeployingGenAItechnologyshouldadopttheseactions.Othersarepotentialsourcesofcompetitivedifferentiation—firmsthatcansuccessfullyexecuteonthesewillbeabletoextractthemostbene-fits,drivingoutsizedefficiencygains,improvinginvestoroutcomesandclientexperiences,anddeliveringindustry-leadingvaluetoalltheirstakeholders.

Exhibit3:KeySuccessFactorsforImplementationofGenAI

Competitivedifferentiators

Deployproprietarydataasastrategicassetwiththerightdataenvironment

ReimagineoperationstoexploitpossibilitiesofAI

Tablestakes

IdentifywhetherGenAIistherightsolutionforspecificbusinessproblem

Maintaintrustandtransparency

Source:OliverWyman

Fromourprojectworkandconversationsacrosstheindustry,firmsareatverydifferentpointsintermsofhowwelltheyaresatisfyingthesesuccessimperatives,buteveryoneistryingtomoveasfastaspossiblegiventherangeofconstraintstheassetandwealthmanage-mentindustriesface.Thebartoevencompete—muchlesswin—isbeingraisedeveryday.Figuringouthowtobestdeploythesecapa-

bilitieswillbeacrucialdeterminantofanorganization’slong-termsuccess.

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1.StateoftheIndustry

1.1.GlobalAssetManagementOutlook

Thebroad-basedsell-offin2022cut$14trillionfromglobalexter-nallymanagedassetsundermanagement(AuM),droppingitfrom$118trillionto$104trillionafteryearsofsteadygrowth.2Thechal-lengesof2022havefadedtosomeextent,withtheS&P500Indexupnearly16%throughthefirsthalfof2023,largelypropelledbyatech-led(especiallyAI-related)reboundthathashelpedliftglobalexternallymanagedAuMclosetoitsprevioushigh.

Exhibit4:GlobalExternallyManagedAuM

$TN,2017-23E

-11.6%

9.9%

118

111

104104

91

8180

2017201820192020202120222023E

Source:OliverWymanGlobalAssetManagementModel

Lookingahead,weexpecta7.0%compoundannualgrowthrate(CAGR)from2022to2027inAuMwhenmeasuredoffalowerend-of-year(EOY)2022base;measuringfrom2021suggestsamorenor-malizedgrowthrateof3.6%.Thatgrowthwillnotbeequallysharedbyeachmarketsegment.

Privatemarkets:WeexpectprivatemarketstocontinuefuelingglobalAuMgrowth,butataslowerraterelativetopastyears(froma19%CAGRin2017-22toa13%CAGRin2022-27E)assignsofprivateequityfundraisingstruggleshaveemergedin2023andasinstitu-tionalallocationsslowfrompeak.Nevertheless,itshouldstillout-growothersegments,ultimatelyaccountingfor16%ofglobalAuMby2027versus12%in2022.

2GlobalAuMsizeof1H23wasnotavailableatthetimeofpublishingduetoinstitutionalAuMbeingreportedwithatimelag.

Democratizationofprivatemarketsforretailinvestorsremainsakeygrowthdriveroverthecomingfiveyearsgivenimprovedaccessenabledbyproductinnovation(e.g.,intervalandtenderofferfunds,BDCsandothersemi-liquidfundofferings),advancementsintech-nology(e.g.,funddistributionandadministrationplatforms),andincreasedcommitmentbyGPstoeducateadvisorstohelpthemsellthesemorecomplexproducts.

Withinprivatemarkets,therelativegrowthoutlookvariesacrossthedifferentassetclasses.

Privateequity(64%ofprivatemarketsAuM3)

.ComparedtotheboomyearsfollowingCOVID-19,whenlowrates,massiveglobalstimulus,favorablepublicmarketenvi-ronment,andfreneticdeal-makingcharacterizedthemarket,corporateprivateequityhassinceexperiencedfundraisingchallengesin1H23asthesefactorsreversed.

.Fallingpublicmarketsin2022meantsomeinstitutionalinvestorsbrushedupagainstallocationlimits,reducingtheirdemandforprivateequityproducts.

.Asthisallocationeffectfadesandretail/wealthinvestorscontinuetochannelcapitalintoPEofferings,thelonger-termoutlookremainsbullish,particularlyforthelargest,mostwell-renowned,andresourcedfirmswhohavethefund-raisingcapabilitiesandglobalfootprintstotapintothemostattractivepocketsofgrowth.

Realestate(13%ofprivatemarketsAuM)

.Afterrecordyearspre-2022,theoutlookremainschallengedovertheshorttomediumtermastherealestatesectorundergoesaperiodofrepricingacrossinvestmentstyles,includingcoreandcore-plusstrategiesinA-locations,andthecommercialrealestatesectorworksthroughrefinancingchallenges.

.Theoutlookislinkedwithbroadereconomicactivity,withapositiveoutlookfornewsectorslikedatacenters,aswellasopportunisticstrategiesthatmonetizecurrentrepricingandexpectedrestructuringcases.

3Source:Preqin.

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Privatecredit(12%ofprivatemarketsAuM)

.Theprivatedebttotaladdressablemarketisestimatedat~$23trillion,butonly~6%iscurrentlypenetratedbyprivatecreditmanagers,leavingplentyroomforgrowth.Thisispar-ticularlyprominentacrossEuropeandAPAC,wherebanksstillplayanimportantrole,butalternativelendershavelearned