After the GameStop story and the Wall Street Bets (WSB) community, specifically after artificially creating losses for hedge funds, the world of hedge funds and investment companies has undergone a rejuvenation and attracted a wide audience. Today, large asset managers are facing increasing competition from smaller investors who are looking to develop their investments on their own, without the involvement of the largest funds.
The financial market depends heavily on the decisions of fund managers who control billions of dollars of assets. These companies have a huge impact on the market and raise huge amounts of money, earning both fees and profits. The asset management industry operates over $3 trillion spread across various assets and the most common fee model is ‘2 and 20’. To elaborate, this scheme involves a 2% commission on all assets under management and 20% on profits, which provides a significant income to the managers. For many companies, revenues range from $835 million to $1.8 billion per year. We take a look at the top investment companies in the world, as well as familiarise ourselves with their strategies
↑ Top 10 largest investment companies
Although fees in the sector have come under pressure in recent years, the traditional remuneration model is still relevant for the best investors. Capital growth is the main source of income for fund managers as it attracts shareholders and increases the amount of assets under management. The more assets, the higher the income, even if the fixed fee is only 2%. It is important to note that many of the largest hedge funds use their track record to create a showcase effect, which in turn helps to increase the number of people willing to invest.
↑ The top 10 largest investment companies are as follows:
- BlackRock (US): $9.07 trillion in assets;
- Vanguard Group (USA): $7.9 trillion;
- UBS Group (Switzerland): $3.52 trillion;
- State Street Global Advisors (US): $3.05 trillion;
- Fidelity Investments (US): $2.92 trillion;
- Allianz Group (Germany): $2.53 trillion;
- JP Morgan (US): $2.51 trillion;
- Goldman Sachs (US): $2.06 trillion;
- Bank of New York Mellon (US): $1.96 trillion;
- PIMCO (US): $1.92 trillion.
Not surprisingly, this list is dominated by American companies, but Swiss UBS, German Allianz are also present. In addition, among European companies it is worth noting the French Amundi, which is ranked twelfth and, therefore, was not included in our ranking of the largest investment organisations. BlackRock, ranked first, manages $9.07 trillion in assets and is the largest ETF provider in the world. Notably, its dominance has been shaped by the growth of both private and public investment over the past 25 years. BlackRock also advises governments in financial crises, which further strengthens its position.
↑ A brief overview of the industry leaders
BlackRock remains a leader with 2,400 funds, including Institutional Cash Series US Dollar Liquidity Core Shares ($44.86 billion in assets) and BlackRock Global Funds - World Technology Fund D2, which has a 5-year return of over 300%. The technology sector is one of the most lucrative, but also more risky. Vanguard Group, which manages $7.9 trillion, focuses on 198 funds. Notable among them are the Vanguard Global Bond Index Fund GBP Hedged Income ($14.12bn), and the Vanguard U.S. Opportunities Fund Investor GBP Income, with a 117% return over 5 years. UBS Group manages $3.52 trillion in assets and offers wealth management and sustainable investing solutions. For example, the UBS ETF MSCI World Socially Responsible fund has seen steady growth thanks to its sustainable strategy.
State Street Global Advisors, with $3.05 trillion in assets, focuses on large cap and international equities. Successful products include State Street World Index Equity Fund I, which has shown returns of up to 85% over 5 years. Fidelity Investments manages $2.92 trillion in assets and offers a wide range of assets including mutual funds and ETFs. One of its flagship products is the Fidelity Contrafund, specialising in equities with long-term growth potential. Allianz Group, with $2.53 trillion in assets, provides asset management and insurance services. The successful Allianz Global Investors - Allianz Income and Growth fund combines equities, bonds and derivatives for diversified income.
JP Morgan manages $2.51 trillion in assets and focuses on dividend stocks such as the JPMorgan Equity Income Fund. The company develops global strategies, providing access to investments around the world. Goldman Sachs, with $2.06 trillion in assets, specialises in investment banking and funds focused on large-cap stocks, such as the Goldman Sachs Growth and Income Fund. Bank of New York Mellon, with $1.96 trillion in assets, stands out for its sustainable investing products. The BNY Mellon Sustainable Global Equity Fund focuses on global equities with sustainable growth elements.
↑ Strategies and approaches of major investment firms
Fund managers employ sophisticated strategies to achieve the best results. Many are based on mathematical models and algorithms. One of the most famous examples is Jim Simons, founder of Renaissance Technologies, who uses complex economic models to analyse the market. His flagship Medallion fund has averaged a 39% annualised return since 1998. This performance is achieved through a team of specialists - mathematicians, physicists and cryptographers.
The companies offer a wide range of asset classes: stocks, bonds, money market funds, derivatives, commodities, mutual funds and ETFs. This diversification reduces the risks associated with economic crises in certain regions. Managers often spread assets across different geographical areas, which helps to offset localised economic problems. However, statistics show that only 1 out of 10 funds outperform the global market, which raises doubts about their effectiveness compared to ETFs.
↑ Summary: Top 10 largest investment companies
The world's largest investment companies control trillions of dollars, offering diversified portfolios for private and institutional investors. Their strategies, based on sophisticated models, allow them to effectively manage risk and achieve high capital gains. Market leaders such as BlackRock and Vanguard continue to dominate despite increasing competition from fintech companies and robo-advisors. In today's environment, investors have access to a wide range of options, including ETFs that provide an alternative to traditional funds. The sophistication of the strategies used by fund managers and their ability to adapt to change make them key players in the global financial market.
Wilfredo Huppert
Wilfredo Huppert is a war journalist with 25 years of experience. He has spent most of his life in military journalism, wars and military-political conflicts, treason investigations and much more.