Pedestrians pass in front of BlackRock Inc. headquarters in New York, U.S., on Friday, Jan. 11, 2019. BlackRock Inc. is scheduled to release earnings figures on January 16. Photographer: Gabriella Angotti-Jones/Bloomberg
BlackRock, Vanguard and State Street Global Advisors have all seen their assets under management fall sharply © Bloomberg

The world’s three biggest fund managers have seen their assets shrink by an estimated $2.8tn this year as a global sell-off in financial markets heralds a decisive end to the industry’s golden era of growth.

BlackRock, Vanguard and State Street Global Advisors have all seen their assets under management fall sharply as a result of the recent market chaos, during which US stocks fell into bear market territory after more than a decade of gains and the FTSE 100 suffered its worst one-day drop since 1987.

BlackRock’s assets hit a record of more than $7.4tn earlier this year, spurred by its iShares exchange traded fund arm. But that figure has now fallen bynearly $1.4tn to $6tn, according to FT calculations, as global equities crashed, including the S&P 500’s 20 per cent drop since its February peak.

Shares in BlackRock have dropped 28 per cent since their February high, cutting the New York based group’s market value to $64bn. The company declined to comment.

Vanguard’s assets reached $6.2tn in January, fell to $5.9tn by the end of February, and are now tracking at about $5.4tn based on recent market falls. Vanguard said assets had dipped in March but it was “still seeing positive cash flow”, including net investor inflows of more than $77bn in the first two months of the year.

Tim Buckley, Vanguard chief executive, advised investors this month to “stay the course”. He added: “In my 30 years in the business, I’ve seen many market storms. Repricings are inevitable, sometimes violent, but never predictable. Panic and rash action aren’t your ally.”

State Street Global Advisors, a unit of the US custodian bank of the same name, had assets of more than $3.1tn earlier this year. Assuming a fall in line with US equity markets, its assets will have fallen by about $600bn to $2.5tn in the past four weeks. The US group declined to comment.

Jim McCaughan, former chief executive of Principal Global Investors, a US asset manager, said the sector’s resplendant era was probably coming to an end, even before the recent market rout. “But February 2020 will be the point when many people come to realise that it was happening,” he said.

Although all three houses are renowned for their vast passive and exchange traded fund operations, they also have large high-fee-paying active portfolios.

“For active managers in liquid markets, the outlook is very difficult, and declining fees will no longer be countered by market buoyancy,” Mr McCaughan said.

Greggory Warren, senior stock analyst at Morningstar, the data provider, said fund managers had been hit hard by a “one-two punch” of market losses and outflows, which would cut management fees.

He said BlackRock would likely perform better than most listed peers because of its large institutional client base and “fairly diverse” product mix. Just over half of BlackRock’s assets are in equity strategies, 31 per cent in fixed income, 8 per cent in multi-asset classes, 7 per cent in money market funds, and 2 per cent in alternatives.

“February 2020 may well be the golden peak for those Goliaths who thrived from the relentless rise of passive investments,” said Amin Rajan, chief executive of consultancy Create Research. But he added central bank stimulus could see a return to the good times. “Having artificially inflated asset prices for so long, central banks’ credibility will be shot to pieces if markets go into prolonged free fall.”

* This story has been corrected to state that world’s three biggest fund managers have seen their assets shrink by an estimated $2.8tn this year, not $2.5tn as stated earlier due to an editing error.

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