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Global, October 1, 2007 - Total assets managed by the world’s largest 500 fund managers grew by 19% in 2006 to US$63.7 trillion according to the Pensions & Investments / Watson Wyatt World 500 ranking. This rate of growth compares to a more moderate rate of 10% in 2005.

The research, conducted in conjunction with P&I, a leading US investment newspaper, also reveals that assets of the top 20 fund managers grew by 23% during 2006 and now total US$25 trillion (US$20 trillion in 2005), which represents 39% of total assets.

Craig Baker, global head of manager research at Watson Wyatt, said: “Buoyant markets in 2006 were the biggest driver of asset gains. The larger firms were the main beneficiaries of growth, although certain boutique firms, particularly those running alternative assets, also added significant assets during the year. Another feature of the year was increasing concentration and ongoing consolidation in the industry.”

According to the survey, there are now 11 European-based investment managers in the top 20, managing 56% of these assets (up from 52% in 2004), while the remaining nine managers in the top 20 are all US-based. During 2006, asset growth among European managers in the top 20 was 29% while US managers achieved 16%. This trend is reflected in the rest of the ranking and for the second time since the inception of the survey, European managers’ assets exceeded the total value of assets managed by North American-based firms, while Japanese managers’ assets remained static.

Craig Baker said: “While the weak US dollar has played a role in this trend, those managers that have offered liability driven investment or diversity products or both have attracted assets and a proportion of these are ‘global’ firms doing business in Europe. Another trend during the past five years is that the market has tended to favour ‘value’ over ‘growth’ managers, however it is possible that this cycle may be about to turn.”

On a five-year view the survey shows that the top 20 has been reasonably stable, with 13 asset managers still in place. This contrasts markedly with the bottom 250 where only 38% of those managers present in 2001 still remain in the ranking. Furthermore, 200 of the original 500 managers have dropped out of the ranking since 2001.

Craig Baker said: “As globalisation forces asset management firms to innovate and reinvent themselves and their offerings, there will be the inevitable churn; but larger firms, with arguably stickier clients and more product diversity, would seem less prone to big changes in fortune.”

While there has been some significant movement in the top 20 during the past five years, UBS has retained the top position and now has assets worth around US$2.5 trillion. Some of the other movements up the ranking during this time include BGI (7 to 2), Capital Group (12 to 7) and State Street Global (6 to 3). The biggest falls in this sector in a five-year period came from Invesco (19 to 36), Morgan Stanley (16 to 24) and Credit Suisse (4 to 11).

Craig Baker said: “During the year passive assets grew by 22%, somewhat above aggregate growth, indicating that funds, probably those with lower governance budgets, added to their passive core during the year.”

According to the survey, the compound annual growth rate (CAGR) of passive assets since 1996 was almost 19%, while during the same period the CAGR of the total 500 was almost 11%.

Craig Baker said: “The asset management industry is gradually changing shape due to a number of forces. First, globalisation is driving significant change and those firms that have global products are more likely to succeed in future, almost regardless of their size. Second, those that innovate with remuneration and ownership structures to help attract and retain true investment talent will be best placed to attract institutional assets. Third, investors are now demanding more value for money and better aligned remuneration structures, so those firms that show leadership in this area will be more attractive to do business with.”

Top 20 asset managers

Ranked by total global assets under management as at 31 December 2006.

Rank	Manager	Country	Total assets (US$ millions)
1	UBS AG	Switzerland	2.452.475
2	Barclays Global Investors	U.K.	1.813.820
3	State Street Global	U.S.	1.748.690
4	AXA Group	France	1.740.000
5	Allianz Group	Germany	1.707.665
6	Fidelity Investments	U.S.	1.635.128
7	Capital Group	U.S.	1.403.854
8	Deutsche Bank AG	Germany	1.273.500
9	Vanguard Group	U.S.	1.167.414
10	BlackRock Group	U.S.	1.124.627
11	Crédit Suisse	Switzerland	1.092.906
12	JPMorgan Chase	U.S.	1.013.729
13	Mellon Financial	U.S.	995.237
14	Legg Mason	U.S.	957.558
15	BNP Paribas	France	817.482
16	ING Groep NV	Netherlands	792.162
17	Natixis	France	769.981
18	AIG Global Investment	U.S.	730.921
19	Crédit Agricole SA	France	704.367
20	Aviva plc	U.K.	700.789

Source: Pensions & Investments/Watson Wyatt global 500 survey

For the full P&I / Watson Wyatt global 500 research, please go to:
http://www.watsonwyatt.com/europe/research/resrender.asp?id=PI_500_Analysis_2007&page=1

For further information please contact:

Paul Deane-Williams
Head of Public Relations - Investment
Watson Wyatt Limited
+44 (0)1737 274397
paul.deane-williams@watsonwyatt.com

Gay Collins
Penrose Financial
+44 (0)207 786 4882
gayc@penrose.co.uk

About Watson Wyatt Investment Consulting
Watson Wyatt Investment Consulting, a division of Watson Wyatt, is focused on creating financial value for institutional investors through independent, best-in-class investment advice. We are specialist investment professionals who provide co-ordinated investment strategy advice based on expertise in risk assessment, strategic asset allocation, and investment manager selection. Watson Wyatt Investment Consulting provides investment advice to some of the world’s largest pension funds and institutional investors, and has more than 410 associates in Europe, the Americas and Asia.

In the US investment advisory and investment consulting services are provided by Watson Wyatt Investment Consulting, Inc., which is a subsidiary of Watson Wyatt Worldwide Inc. Watson Wyatt Investment Consulting, Inc., is a registered investment adviser with the Securities and Exchange Commission.

Watson Wyatt (NYSE: WW) is a leading global human capital and financial management consulting firm. The firm specialises in employee benefits, investment consulting, human capital strategies, technology solutions, and insurance and financial services and has 7,000 associates in 31 countries. The firm is located on the Web at www.watsonwyatt.com.