The total assets managed by the world's fund managers hit an all-time high of US$84.9 trillion last year - a number that looks set to almost double to US$145.4 trillion by 2025.
According to PwC, this means the industry will see assets growing at a pace of 6.2 per cent a year, with the fastest growth seen in Latin America and Asia-Pacific.
"The burgeoning wealth of high-net worth individuals and the mass affluent, as well as a pronounced shift to defined contribution retirement saving, are propelling huge growth in the asset and wealth management industry,” PwC wealth leader, Olwyn Alexander said in a statement.
While a majority of funds are still actively managed, passive funds should more than double from US$14.2 trillion to US$36.6 trillion by 2025 - accounting for 25 per cent of global assets under management.
Active management will continue to grow and play an important role and should reach US$87.6 trillion by 2025.
But, PwC predicts active managers' share of global assets under managmentwill drop from 71 per cent in 2016 to 60 per cent by 2025.
Alternatives assets grow
Interestingly, alternative asset classes - in particular, real assets, private equity and private debt - are forecast to more than double in size to US$21.1 trillion by 2025, as investors diversify to reduce volatility and achieve specific outcomes.
The industry’s involvement in niche areas such as trade finance, peer-to-peer lending and infrastructure will also dramatically increase, the consultant concluded.
PwC anticipates assets growing at 5.7 per cent a year in North America from 2016 to 2020, slowing to 4.0 per cent per annum from 2020 to 2025.
US assets will rise from US$46.9 trillion to US$71.2 trillion over the nine years, according to PwC.
Similarly, Europe is projected to grow at 8.4 per cent and 3.4 per cent per annum respectively over the two periods, with assets rising from US$21.9 trillion to US$35.7 trillion.
Rising middle class
Asia-Pacific’s growing middle class is set to spur growth of 8.7 per cent a year from 2016 to 2020, accelerating to 11.8 per cent from 2020 to 2025.
This will lift regional assets from US$12.1 trillion to US$29.6 trillion.
Latin America is likely to grow at similarly rapid rates of 7.5 per cent per annum from 2016 to 2020, rising to 10.4 per cent a year from 2020 to 2025.
From a low base of US$3.3 trillion, the region’s assets are projected to increase to US$7.3 trillion.
“Asset managers can take advantage of this massive global growth opportunity if they’re innovative.
"But it’s do or die and there will be a ‘great divide’ between few have’s and many have not’s.
"As a result, things will look very different in five to ten years’ time and we expect to see fewer firms managing far more assets significantly more cheaply.”