- U.S. active mutual funds are bleeding assets (over US$1.8T outflows in 2023624) while industry AUM growth is largely market-driven.
- ETFsespecially active ETFsare taking share fast on cost/tax/operational advantages, with U.S. active ETF AUM jumping from ~US$502B to ~US$843B in 2024.
- Growth is shifting to private markets and new structures like private credit and evergreen/hybrid funds, often via bank-manager partnerships and broader-access vehicles.
- Profitability per AUM is compressing as fees fall and costs rise, pushing firms toward scale, AI/automation, and tighter cost discipline.
Read More
The investment management landscape entering 2026 is defined by structural shifts rather than cyclical swings. Based on the Deloitte 2025-2026 outlook and corroborating reports from BCG, McKinsey, and PwC, three major transitions stand out: the decline of traditional active mutual funds in favor of lower-cost ETF wrappers; surging demand in private markets and alternative fund structures; and a pressing need to scale through technology, especially AI, alongside cost discipline to protect margins.
Active vs Passive and the ETF Revolution
Active long-term mutual funds are losing investor favor. In the U.S., active mutual funds have had net outflows exceeding US$1.8 trillion over the past two years. Investors are shifting into ETFs—both passive and, increasingly, active ETF formats—which offer cost, tax, and operational advantages. The U.S. active ETF market grew its AUM 68 % during 2024 (from US$502B to US$843B) and now represents about 26 % of U.S. ETF net inflows. Deloitte predicts active ETFs could grow to US$11 trillion AUM globally by 2035.
Alternative Asset Classes & Product Innovation
The demand for private credit, infrastructure, evergreen funds, hybrid fund structures, and strategic bank-manager partnerships is accelerating. Deloitte notes that private credit assets exceeded US$2.1 trillion in 2023 and are expected to continue double-digit growth. Innovative fund structures and offerings (evergreen funds, 3(c)(7) funds, ELTIFs in Europe) are being used to appeal to a broader investor base. These vehicles also help mitigate liquidity concerns and flexibility demands from both institutional and high-net worth investors.
Profit Pressure and the Imperative for Scale & Technology
Rising revenues are being offset by shrinking margins. PwC reports that profit per AUM has declined ~19 % since 2018 and is projected to drop another ~9 % by 2030. Fee compression from passive and ETF competition, rising costs (talent, compliance, technology), and the expense of integrating AI are among the prime headwinds. Success will go to those firms that can embrace cost-saving tech (AI, automation), build scale (via M&A, partnerships, or sheer AUM growth), and deploy product innovation effectively.
Regional and Client Segment Dynamics
Growth is uneven globally. McKinsey and BCG point to Asia-Pacific and EMEA as regions with stronger net flows than the Americas, which saw slower organic growth in 2025. Within clients, retirement (defined contribution), wealth (high-net worth), and insurance segments are contributing most flows. Digital platforms and retail investor participation is also rising.
Open Questions & Strategic Imperatives
Key uncertainties include: (a) when—or if—active mutual funds will stabilize or reverse outflows; (b) how fast active ETFs can scale without sacrificing performance or transparency; (c) whether private markets will sustain growth if exit activity remains weak; and (d) what regulatory shifts will reshape fund packaging, disclosure (especially ESG or AI-governance), and tax treatment of ETFs vs mutual funds.
Supporting Notes
- U.S. active mutual funds lost over US$1.8 trillion in net cash flows across 2023–2024, compared to US$2.1 trillion cumulatively between 2014–2021.
- Active ETFs AUM in the U.S. increased 68 % in 2024, from US$502 billion to US$843 billion.
- Active ETFs’ share of total U.S. ETF net inflows rose from roughly 1 % in 2014 to ~26 % in 2024.
- Private credit assets globally were more than US$2.1 trillion in 2023, growing at double-digit rates.
- Evergreen and hybrid fund structures doubled to ~520 funds globally, with ~US$350 billion in assets under management as of 2023.
- According to PwC, global AUM expected to grow from US$139 trillion (2024) to about US$200 trillion by 2030 (CAGR ~6.2 %). Private markets revenues projected to reach approx. US$432 billion and deliver over half of total industry revenues by 2030.
- Profit per AUM fell ~19 % since 2018, and a further ~9 % decline forecast by 2030.
- Passive mutual funds and ETFs saw ~US$918 billion net inflows, while active funds had ~US$177 billion net outflows over the 12-month period ended September 30, 2025.