Forecasting asset growth
Our approach combines historical analysis, economic indicators, and market-specific factors. We start by looking at historical market growth rates, distinguishing between asset performance and net inflows into the market. This enables us to produce a baseline forecast using assumptions about future asset growth after fees, based on current asset allocation patterns and expected returns for each asset class.
The next key component of our analysis is the correlation between total assets and nominal GDP (Gross Domestic Product) for the respective countries. In cases where this correlation is strong, we include our own Raiffeisen Research GDP forecasts as a predictive variable. This approach allows us to capture the economic dynamics specific to each country and considers a (partial) convergence of less developed (CEE) markets towards more developed (Western) European averages, a trend we've also observed in the historical data. Factoring in such structural market drivers is of special importance in a “convergence region” like Central and Southeastern Europe. We have seen such trends also in the regional banking sectors over the last decade, supporting high-growth periods with assets and loan growth well above (nominal) GDP growth rates. To quantify this “convergence effect”, we analyze a country's ratio of total assets in the asset management industry in relation to GDP and project when this ratio might partially converge to the European average.
Finally, current, and projected savings rates, provided by national statistics offices, are also factored into our forecasts. We adjust our projections based on anticipated changes in savings rates during the future convergence process, with increasing rates slightly boosting our total assets forecast and vice versa.
It's important to note two caveats in our analysis:
First, the EU's regulatory framework allows for funds registered in any member state to be accessed by all EU-investors (European Union), potentially skewing country-specific data. Luxembourg, with over 5 trillion euro in domiciled fund assets, is a prime example of this phenomenon.
Second, our data generally excludes pension fund assets for most countries due to data availability, which could significantly impact the overall picture in some markets.
Key findings of the research
Looking at the data, our research reveals a few key findings:
Unsurprisingly we expect the developed asset management market of Austria to grow significantly slower until 2030 compared to the CEE markets, at an annual compound growth rate of around 5.2%.
Organic asset performance plays a significantly larger role here than net inflows. We project performance after fees to make up for around 3.8% in annual growth as compared to net inflows with only 1.4%. This picture however reverses in most CEE countries, which we expect to grow at an average annual rate of 12.1% until 2030. Here, net inflows make up on average for 7.1% of asset growth as compared performance with only 5.0%. The gap can be explained to a large part by the proportionally smaller asset management markets as compared to the “main street economy” i.e. GDP. We expect this gap to continue decreasing over the next few years.
Projected compound annual growth rate in % for total assets from 2024–2030.
Two distinct categories of countries in the CEE region
It also becomes apparent that there are two distinct categories of countries in the CEE region:
First category
The first category includes relatively developed markets such as the Czechia and Hungary, characterized by a well-established asset management industry, which has also enabled these countries to experience strong asset growth in recent years. They, however, haven’t fully caught up to their Western European peers, and we expect this convergence to continue.
Second category
The second category includes countries such as Bulgaria and Croatia, where the asset management industry has a low penetration rate, and total assets are minimal. In these regions, the issue of funds registered in another EU country is likely to play a major role, due to missing scale decreasing the competitiveness of locally registered funds. This makes them also much more difficult to forecast, and we do strongly believe that convergence will eventually play an even larger role here than in the first category countries.
Projected assets for the respective countries in billion EUR (Czechia, Hungary, Poland)
Projected assets for the respective countries in billion EUR (Bulgaria, Croatia, Romania, Slovakia, Slovenia)
Overall, the CEE asset management markets are still underpenetrated when it comes to overall market size. Currently Austrian assets alone (more than 200 billion euro) exceed those of all the CEE countries in our sample combined, which is particularly striking given that these countries have a combined population of around 94 million, more than ten times that of Austria.
However, our projections suggest that the CEE countries will catch up with Austria in terms of total assets by 2028 and then overtake it due to much faster growth and the convergence trend mentioned above. Despite this rapid growth, it is crucial to maintain perspective on the market's size. As of 2023, the total assets under management in all CEE countries combined are less than 200 billion euro. To put this in context, a single asset manager with this amount under management wouldn't even rank among the top 100 globally and the largest European asset manager, UBS, manages approximately 25 times this amount.
Total assets in billion EUR, Select CEE countries and Austria
*Total assets in billion EUR, Select CEE countries are Bulgaria, Croatia, Czechia, Hungary, Poland, Romania, Slovakia, and Slovenia.
In conclusion, while the CEE asset management market is experiencing fast growth and presents emerging opportunities, it remains a fragmented niche market in the global context. This results in both, challenges and opportunities for asset managers looking to navigate this dynamic landscape.
This document has been produced by Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna/Austria
Supervisory Authorities: Austrian Financial Market Authority (FMA), Austrian National Bank, European Central Bank within the Single Supervisory Mechanism (SSM).
Imprint according to the Austrian Media Act: Media Owner and Publisher is Raiffeisen Bank International AG
This document constitutes neither investment advice, an offer or a recommendation nor an invitation to execute a transaction. Past performance is no reliable indicator of future results. The information presented does not constitute binding tax, financial or legal advice.
This document is based on the knowledge the persons preparing the document have obtained up to the date of creation. Errors and misprints excepted.
As of October 2024