Market Data 
The latest edition of the State of the Market: Future of Retail Products Report by ISS Market Intelligence presents a forecast for the global asset management industry, predicting a steady increase in assets under management (AUM) to $43.6 trillion by 2029. This represents an annualized growth rate of 7.1 percent over the next five years.
Asset managers are expected to see benefits from improved sales growth, with expanding product categories such as active ETFs and private markets, and stronger-performing markets in bonds and non-U.S. equities. The decline in cash’s appeal due to lower yields is anticipated to slightly accelerate organic growth, with long-term funds projected to attract $2.8 trillion in net flows by 2029. Taxable bond funds are set to draw significant interest, with an expected $2.1 trillion in new flows, propelled by favorable demographics and falling interest rates.
The report also underscores the rising popularity of active ETF investment strategies, noting a significant portion of AUM growth has been concentrated in funds less than three years old. Active ETFs are becoming a preferred vehicle for advisors and a key focus for new product development by asset managers. Although index ETFs are projected to capture 70 percent of the $3.1 trillion in ETF flows, active ETFs are expected to increase their market share from roughly 2.8 percent to nearly 4.9 percent within five years, contributing disproportionately to revenue growth in the industry.
Christopher Davis, the U.S. Head of Research at ISS Market Intelligence, remarked on the evolving challenges and opportunities for asset managers. He highlighted the impact of aging demographics and index funds on market share, as well as the entrance of new competitors from traditional alternatives managers. Davis emphasized the potential for both risk and opportunity, pointing to the rapid development of new products and distribution channels as avenues for active managers to thrive.
The report also identifies a growing demand for alternative investments. Liquid alternative demand has risen, influenced by products like crypto and defined outcome funds. Semi-liquid structures, such as interval funds, which saw AUM reach $83 billion by September 2024, along with tender offer funds and Business Development Companies (BDCs) focusing on private credit, represent a promising area for managers seeking revenue less affected by passive strategies.
Davis added that the investment landscape is undergoing a pivotal transformation, with increased market complexity and investor sophistication driving a shift towards active strategies and liquid alternatives. He advised market participants to stay agile and use data-driven insights to navigate the changing environment.
The report also highlights the growing importance of enhanced data analytics and sustainability considerations in investment decision-making, which are expected to continue influencing asset flows and performance outcomes.
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