The takeaway from new Morningstar research is unsurprising: In asset management, the biggest firms keep getting bigger. But the research also has insights into some notable differences between the behemoth investment companies, as well as what’s happening at more than 100 smaller firms.
“The shape of the asset-management industry is ever morphing. Things happen — perhaps a market event, regulatory development, or new investor preference — and asset managers respond. As such, new industry leaders emerge over time while incumbents fight to keep their spots. Some innovations and pivots pay off, and some don’t, while standing still can also be risky,” wrote the authors of Morningstar’s report about the largest investment fund families. It’s the first time in five years that Morningstar has specifically analyzed large asset managers.
The longstanding trend toward passive investment funds continues, with a handful of fund families reaping most of the benefits.
The largest 20 firms account for a whopping 85 percent of assets under management in the U.S., which means the next 130 firms take up only 15 percent of AUM. Assets also have become significantly more concentrated over the past 10 years. In August 2014, the top four firms (Vanguard, Capital Group, Fidelity Investments, and BlackRock) accounted for 43 percent of fund assets under management in the U.S.
As of August 2024, Vanguard’s assets represented an eye-opening 29 percent share of the U.S. open-end fund and ETF market, largely because of its popular, cheap, and core-oriented index funds. BlackRock (with a 12 percent share), Fidelity, State Street, and Charles Schwab also continue to have large passive businesses, according to Morningstar’s report.
But passive index fund flows don’t exclusively determine Morningstar’s list of the biggest fund families. “Investor preference for lower-cost passive investments continues to make a seemingly indelible imprint on the US fund landscape, but index funds aren’t the only game in town. Active asset managers are making moves in their fight to regain market share and reach additional investors,” wrote the authors.
Actively managed open-end funds and active ETFs — which come with more favorable tax treatment — as well as traditional asset managers’ expansions into alternative investments will shape the list of the largest fund families in the future, even if only gradually or slightly. Vanguard’s popular index funds are what first come to mind for many investors, who might forget that its other businesses are huge. It has highly regarded actively managed funds that account for only 15 percent of the firm’s assets under management — but that’s still well over $1 billion.
Whether measured in dollar terms, a percentage of a manager’s AUM, or both, Morningstar pointed to several examples of firms with unique strengths that could put them on different trajectories compared to peers. At BlackRock, the success of a new fund isn’t dramatically changing the course of the company: the iShares Bitcoin Trust ETF, which launched in January 2024 and has attracted billions of dollars in flows. The ETF has helped make BlackRock the largest alternative open-end and ETF fund manager in the U.S. with $37 billion in assets (more than half of that is in the iShares Bitcoin Trust ETF), but that amount represents just 1.1 percent of its total fund assets. There is a similar dynamic at Capital Group, where recently launched, active ETFs have attracted $39 billion in assets but which represents just 1 percent of the firm’s overall AUM.
The Invesco QQQ Trust ETF represented more than one third of Invesco’s fund AUM, helping the firm break into the top 10 largest. That ETF is also an example of a major passive fund success beyond the walls of Vanguard and BlackRock. A clutch of other passive-fund purveyors, such as First Trust, VanEck, and WisdomTree, among others, also are climbing the AUM ranks, Morningstar notes.
Still, there is room for smaller fund families to succeed.
While the largest 29 firms had single-digit growth rates (or negative ones), some firms with smaller asset bases have seen “eye-popping growth if a product gets hot,” according to Morningstar. Alpha Architect, Simplify, and North Slope all have less that $6 billion in assets, but their respective ETFs have gained traction and they all achieved growth rates of more than 100 percent over the past year.
