The ten key trends and strategies for the future of asset management phenomenon

The asset management industry, responsible for managing investments on behalf of clients to achieve specific financial objectives, is at a critical juncture. With global assets under management (AUM) projected to surpass $145 trillion by 2025, according to PwC’s Global AUM report, the industry is going toward significant growth and transformation.

Currently, the asset management market experiences a compound annual growth rate (CAGR) of more than 34% and will keep growing until 2032 (see Fig.1). Besides, one cannot avoid mentioning the emergency of asset management behemoths like BlackRock and the Vanguard Group, funds holding trillions of assets under their management.Figure 1. Asset management market.

This article explores key trends and strategies shaping the future of asset management. It also offers insights on how to navigate the changing landscape.

Eight asset management trends to watch in 2025

As the asset management industry changes, several pivotal trends will significantly impact how firms operate and serve their clients in 2025 and beyond.

Here are the ten key trends to consider:

• Digital transformation and technology integration
• ESG or sustainable investing
• Customization and personalization of investment portfolios
• Globalization and emerging markets
• Regulatory changes and compliance
• Increased focus on cybersecurity
• The growth of alternative investments
• Demographic shifts and the rise of a new investor class
• The ongoing active vs passive management battle
• Institutional asset management change

1. Digital transformation and technology integration

Technology is transforming the asset management industry, revolutionizing everything from portfolio management to client engagement. The integration of advanced analytics, artificial intelligence (AI), and machine learning (ML) allows asset managers to process vast amounts of data, enabling more informed and strategic investment decisions. For example, predictive analytics can forecast market trends and identify potential risks, empowering managers to make proactive portfolio adjustments.

Building upon these technological advancements, digital platforms like robo-advisors are reshaping the landscape of investment services. Offering automated, low-cost solutions, robo-advisors are particularly appealing to tech-savvy and cost-conscious investors. According to Statista, robo-advisory services are expected to manage over $2.5 trillion in assets by 2025. As it happens, the robo-advisors market shows unprecedented growth (see Fig.2).Figure 2. U.S. robo-advisory market

However, choosing between a myriad of technologies can be a daunting task. That is exactly why companies need to go through the path others have already paved.

An effective starting point is to explore Salesforce Asset Management initiatives. Collaborating with experienced companies can help you tap into new growth and investment opportunities. This approach provides a ready-to-deploy system with reliable asset management tools and strategies to support your objectives.

2. Rise of Environmental, Social, and Governance (ESG) investing

ESG strategy means factoring in non-financial issues in investment decisions. It aims to find material risks and growth opportunities. Investors are increasingly aware of their investments’ impact on society and the environment. A 2024 survey by Morgan Stanley found that 85% of individual investors are interested in ESG investing. According to Morningstar, sustainable funds attracted $51 billion in net new money in 2023.

In response to this growing interest, asset managers are incorporating ESG criteria into their investment processes. They invest in firms with low carbon footprints, strong labor practices, and transparent governance structures. This approach aligns with the values of socially conscious investors and aims to mitigate risks and capitalize on opportunities associated with sustainability trends.

3. Customization and personalization of investment portfolios

Clients today are seeking more than standardized, one-size-fits-all investment solutions—they want personalized portfolios tailored to their unique financial goals, risk tolerance, and values. Thanks to technological advancements, asset managers can now offer these customized solutions at scale, meeting the rising demand for personalization.

In such a context, mass customization is achieved through modular investment products and sophisticated algorithms that tailor portfolios to individual client profiles. This trend is particularly appealing to millennial and Gen Z investors, who prioritize personalization and digital engagement. The impact of this shift is evident in the rapid growth of the consumer market (see Fig. 3).Figure 3. Retail ecommerce sales worldwide.

As a result, the move toward personalized investment portfolios is reshaping the asset management industry. Asset managers who leverage technology to provide more client-centric solutions will be better positioned to attract new clients and increase assets under management.

4. Globalization and emerging markets

Emerging markets offer attractive growth prospects due to higher economic growth rates than developed markets. As a result, asset managers are expanding their offerings to include investments in countries like China, India, and Brazil. However, with this global expansion comes increased exposure to currency fluctuations, geopolitical risks, and varying regulatory environments. Therefore, asset managers must possess deep expertise in international markets to navigate these complexities effectively.

To capitalize on these opportunities while managing associated risks, asset managers are investing in emerging market ETFs that focus on companies benefiting from the growing middle class in Asia. These ETFs allow for diversification across various sectors and countries, providing exposure to high-growth markets while mitigating some of the risks inherent in direct investments.

5. Regulatory changes and compliance

The regulatory landscape is becoming increasingly stringent, with regulators focusing on investor protection, transparency, and systemic risk reduction. Compliance with regulations such as the General Data Protection Regulation (GDPR), the Securities and Exchange Commission’s (SEC), and Digital Operational Resilience Act (DORA) regulations requires significant resources.

Failure to comply can lead to hefty fines and severe reputational damage. As a result, asset managers are investing in compliance technology (RegTech) to automate compliance processes and ensure adherence to regulatory requirements. Notably, the RegTech market is projected to reach $86 billion by 2032, a more than fivefold increase from its current valuation of $15 billion.

Asset managers must navigate the increasingly stringent regulatory landscape to avoid fines and reputational damage. Investing in compliance technology can help. It can automate compliance processes and keep businesses ahead of regulations. A company capable of surviving in a fierce regulatory environment can stand against any given threat out there.

6. Increased focus on cybersecurity

While integrating technological advancements is often a blessing, in some instances, it can be a curse. When the technology is adopted improperly and without the right safety mechanisms, the risk of data breaches and cybersecurity threats skyrockets. Protecting sensitive client data and ensuring secure transactions have become top priorities for all financial institutions. 

That is exactly why asset management funds invest heavily in cybersecurity measures, such as advanced encryption, intrusion detection systems, and employee training programs, to safeguard against data breaches and cyber-attacks (see Fig. 4).Figure 4. Spending on cybersecurity.

Additionally, the rise of remote work, driven by global events, has expanded the potential attack surface for cyber threats. Firms are now focusing on securing remote access and ensuring that employees adhere to best practices while working outside the traditional office environment.

As cyber threats continue to evolve, asset management firms must prioritize cybersecurity to protect their clients and maintain trust. By implementing advanced security measures and adhering to regulatory requirements, firms can mitigate risks and ensure the integrity of their digital operations.

7. The growth of alternative investments

Investors seek new avenues to diversify their portfolios and enhance returns as the financial landscape becomes more complex. In addition to embracing technological advancements and focusing on cybersecurity, there is a noticeable shift toward alternative investments.

Getting into alternative investments means turning toward assets such as:

• private equity;
• hedge funds;
• real estate;
• commodities.

These investments offer diversification and the potential for higher returns, as they often exhibit lower correlation with traditional markets, providing a hedge against volatility. In response, asset managers are expanding their offerings to include alternative investment strategies, catering to the growing demand from both retail and institutional investors.

For example, launching a real estate investment trust (REIT) allows clients to invest in commercial properties with the potential for stable income and capital appreciation.

8. Demographic shifts and the rise of new investor classes

Changing demographics, such as the aging baby boomer population and the increasing wealth of millennials and Generation Z, reshape the asset management landscape. Younger investors are more tech-savvy, socially conscious, and interested in personalized investment solutions (see Fig. 5).

Asset managers must adapt. They must offer digital platforms, sustainable investments, and educational resources that appeal to new investors.Figure 5. Key Generation Z statistics.

Embracing these trends allows asset managers to innovate and differentiate themselves in a crowded market. By integrating cutting-edge technology, prioritizing cybersecurity, and expanding into alternative investments. When addressing the new investor classes’ preferences, firms can position themselves for sustained success. Staying attuned to these shifts will enable asset managers to navigate the challenges of 2025 and capitalize on new opportunities.

9. The ongoing active vs passive management battle

The debate between active and passive management has intensified in recent years, with passive investing gaining popularity due to its low costs and consistent performance relative to benchmarks.

Active Management:

• It involves selecting individual securities to outperform the market.
• Relies on the expertise of portfolio managers and analysts.
• Typically charges higher fees due to the research and resources involved.

Passive Management:

• It involves investing in index funds or ETFs that track market indexes.
• Lower fees due to less active involvement in security selection.
• Appeals to investors seeking market returns with minimal costs.

Recent trends show a significant shift towards passive investment strategies. Morningstar claims passive funds accounted for 51% of the U.S. mutual fund market because the appeal lies in lower fees and higher rates of transparency, you can see the correlation between active and passive funds (see Fig. 6). Figure 6. Active and passive assets correlation.

However, proponents of active management argue that active strategies can outperform passive ones, particularly in volatile or inefficient markets, where active managers can capitalize on market anomalies.

In response to the active versus passive management debate, the industry is witnessing the emergence of hybrid strategies that combine the advantages of both approaches. These innovative methods address investor demands for both cost efficiency and the potential for enhanced returns.

1. The rise of innovative beta strategies blends active and passive management. They use new rules to build alternative indexes.

2. An increasing number of investors are adopting a core-satellite approach. In such a case, the core portfolio is passive, and satellite holdings are actively managed to seek additional returns.

The active versus passive management debate continues to influence the asset management industry significantly, pushing firms to innovate and adapt their strategies. The emergence of hybrid approaches, such as smart beta strategies and core-satellite portfolios, reflects a pragmatic shift toward combining the cost efficiency of passive investing with the potential for outperformance offered by active management. By integrating the strengths of both approaches, asset managers can better meet investor demands for lower fees without sacrificing the opportunity for enhanced returns, positioning themselves favorably in a competitive and evolving market.

10. Institutional asset management change

Institutional investors, such as pension funds, endowments, and insurance companies, are significant players in the asset management industry due to the vast amounts of capital they manage. Several key subtrends influence their strategies and decision-making processes as they seek to fulfill their long-term obligations and investment goals. Recognizing these is essential for asset managers aiming to align their services with the evolving needs of institutional clients.

• Increased allocation to alternative investments. Institutions are diversifying portfolios by increasing allocations to alternative investments to enhance returns and reduce correlations with traditional assets.
• Focus on Liability-Driven Investment (LDI) strategies. LDI strategies aim to align investment portfolios with future liabilities. This approach is particularly relevant for pension funds matching assets with expected payouts.
• Adoption of ESG criteria. Institutional investors are integrating ESG factors into their investment processes, driven by stakeholder demands and regulatory pressures.
• Risk management and regulatory compliance. Institutions are enhancing risk management practices and ensuring compliance with complex regulatory frameworks.
• Use of Outsourced CIO (OCIO) services. Some institutions outsource investment management functions to external providers offering OCIO services, allowing them to access expertise and reduce operational burdens. The percentage of institutions believe OCIO services are worth the fees (see Fig. 7).

Figure 7. OCIO services are worth the fees.

Overall, the ten key trends outlined above reflect a shift toward more flexible investment strategies that combine the advantages of both active and passive management. By adopting these hybrid approaches, investors aim to build balanced portfolios that reduce costs while providing the potential for outperformance in targeted market segments.

Asset managers find opportunities amidst the challenges

Firms face many challenges ranging from technological disruptions to shifting client expectations. However, these challenges also present unique opportunities for asset managers to innovate, adapt, and find new pathways that allow them to thrive in a competitive market.

Embracing technology for operational efficiency

Adopting advanced technology is becoming essential for asset managers aiming to enhance operational efficiency and reduce costs. Automation and digital tools can streamline processes, minimize errors, and free up human resources for more strategic tasks. Firms can significantly improve productivity by automating routine operations such as data entry, account reconciliation, and compliance checks.

Enhancing client engagement and experience

In today’s fast-paced digital world, clients expect seamless, real-time access to their financial information. Asset managers are responding by developing digital platforms and mobile applications that allow users to monitor their portfolios, receive updates, and communicate with their asset managers anytime, anywhere.

Providing educational resources—such as webinars, tutorials, and market analysis—further enhances the client experience. Interactive tools like investment calculators, risk assessment modules, and personalized dashboards empower clients to make informed decisions.

Diversifying product offerings

To meet the evolving needs of investors and mitigate risks associated with market volatility, asset managers are expanding their product range to include alternative investments. These may offer higher returns and diversification benefits beyond traditional asset classes like stocks and bonds.

Alternative investments include private equity, real estate, infrastructure projects, hedge funds, and commodities. By offering these options, asset managers can attract clients seeking to diversify their portfolios and explore new investment opportunities.

Focusing on sustainable investing

Sustainable investing has transitioned from a niche market to a mainstream demand as investors increasingly seek to align their portfolios with their values. Asset managers are responding by developing specialized Environmental, Social, and Governance (ESG) funds and integrating sustainability into all investment processes.

Creating investment products that focus on companies with strong ESG practices can attract investors interested in responsible investing. For instance, establishing a green bond fund that invests in projects with environmental benefits, such as renewable energy initiatives, not only contributes to global sustainability efforts but also meets the growing demand for impact investing.

Developing specialized ESG funds and integrating sustainability into all investment processes can attract investors interested in responsible investing (see Fig. 8).Figure 8. Global assets and professional management in trillion dollars.

Strategic partnerships and collaborations

Collaborating with fintech companies and other innovative firms allows asset managers to access cutting-edge technology and specialized expertise. These partnerships can enhance data analytics, cybersecurity, customer relationship management, and product development capabilities.

Embracing innovation, prioritizing client needs, and fostering strategic collaborations enable asset managers to navigate uncertainties and capitalize on emerging opportunities. By turning challenges into catalysts for growth, firms can enhance operational efficiency, expand their offerings, and strengthen client relationships.

Ultimately, those who adapt and evolve in response to industry shifts will be best positioned for sustained success in the future. Asset managers who proactively embrace technological advancements, diversify their products, focus on sustainable investing, and build strategic partnerships will survive in a competitive landscape and thrive and lead the industry forward.

Conclusion

The asset management industry stands at a pivotal point of transformation. Rapid technological advancements, evolving investor preferences, regulatory changes, and global economics fuel the drive. The ten key trends and strategies discussed—ranging from digital transformation and ESG investing to the active versus passive management debate and institutional asset management changes—are profoundly reshaping such a landscape.

Asset managers are challenged to innovate and adapt to thrive in this dynamic environment.

• Embracing technology for operational efficiency enables firms to streamline processes, reduce costs, and focus on strategic activities that add client value.
• Enhancing client engagement through digital platforms and personalized services meets the growing demand for accessibility and customization, particularly among younger, tech-savvy investors.

The key lies in leveraging technology, enhancing client engagement, and offering diversified and sustainable investment solutions. Asset managers who proactively adapt to these trends—embracing digital transformation, focusing on ESG factors, and delivering personalized investment solutions—will be well-positioned to succeed.

Contact us, and our experts will ensure you get the most out of what asset management can offer.