Top Asset Management Trends in 2026

Over the past two decades, industry fee pressures and consolidation of intermediaries have shifted the balance of power further away from the fund providers to distributors and end users.

Passive investing continues to pull market share on the traditional side of the asset-management business, putting active fund fees under pressure. On the other hand, alternatives continue to feel the benefits of strong demand—but recent private-credit turmoil could stress demand in the short term.

Morningstar researchers take an in-depth look at the traditional and alternative asset management spaces, market conditions, future outlooks, top industry picks, and more.

Passively managed products have taken share from actively managed funds over much of the past two decades.

Fueling the trend, the retail-advised channel continues to shift to fee-based accounts over commission-based structures. Institutional investors are also turning more and more to index-based funds to attain market exposure while pursuing alpha with other products, increasing the demand for index funds and ETFs.

Active equity funds remain in net outflow mode due to their costs and continued underperformance relative to their fee-earning passive peers. In contrast, passive equity fund flows have stayed mostly positive, regardless of whether US equity markets are up or down.

In fixed income, active bond funds had recovered from their historic 2022 outflows in response to rising short-term rates. Still, we expect the Iran war, with its prospect for higher inflation and interest rates, to weigh on flows in the near future.

Active funds remain dominant in Europe, but swung to outflows in March with the weakest month for the category in over two years. Passive fund flows held positive, but fell to their second-lowest month in three years.

Base fees continue to trend down for both active and passive funds. Longer term, we expect fee compression to persist, driven by the growth of low-cost funds and ongoing fee reductions.

The growth of low-cost passive products and more stringent retail distribution platforms are putting pressure on active managers. Average asset-weighted expense ratios for active funds have dropped below 60 basis points.

On the passive side, the largest providers have leveraged their scale to drive prices lower. Average asset-weighted expense ratios are now closer to 10 basis points overall.

Things won’t improve much in the near future. Vanguard cut fees on around 10% of its $11.5 trillion portfolio of US mutual fund, ETF, and money market fund assets earlier this year. This resulted in an average expense ratio cut of around 27% for 84 share classes across 53 mutual funds and ETFs in the firm's portfolio.

While the median fee reduction was about 1 basis point, Vanguard is taking anywhere from 1 to 6 basis points off the expense ratio of many of its funds, which will pressure some managers in our coverage to follow suit.

However, average expense ratios for the industry have started to decline at a slower rate, while fees have come down for our coverage at a higher rate than in prior periods.

Innovative pricing models, like performance-based or hybrid fee structures, can potentially align incentives and help managers stand out in a crowded field.

Organic AUM growth can make traditional asset managers slightly less reliant on market gains to grow their managed assets.

The past four quarters have been a vast improvement over levels seen during 2022-23, when the annualized rate of organic AUM growth for the group was negative 2.3% on average. Only BlackRock, Invesco, and Cohen & Steers generated higher organic AUM growth over the past five years than their traditional asset-management peers, primarily due to their passive and niche product offerings.

Meanwhile, T. Rowe Price, Franklin Resources, and Federated Hermes have been perennial underperformers, creating consistently negative organic AUM growth during 2021-25. However, we've seen positive results from Franklin and Janus Henderson of late.

As organic growth stalls, asset management firms may use acquisitions to gain exposure to faster-growing products or geographic markets, further fueling industry consolidation.

Following the global financial crisis, institutional capital that had historically been dedicated to active equity and fixed-income strategies started migrating over to passive products, specialty offerings, and alternative assets—with the former offering low-cost market exposure and the latter providing differentiated alpha.

While the retail shift took a bit longer, we've seen similar movement in the retail-advised channel, especially with high-net-worth clients, who as “sophisticated investors” can invest in private equity and private credit offerings.

Heightened fundraising activity for credit products is likely to slow in the near future. In our view, the bigger risk areas for the alternative-asset managers are direct lending (loans made directly to companies) and opportunistic credit (bridging the gap between direct lending and distressed debt).

Asset-backed (loans secured by specific, income-generating assets or hard collateral) and other credit funds can be problematic depending on what the funds are investing in.

The company remains broadly diversified across business segments—private equity, real estate/real assets, credit and insurance, and multi-asset investing—with meaningful amounts of scale in each category. This leaves it better positioned to navigate the current climate than its peers, especially in the alternative credit market where less than 15% of its total fee-earning AUM is exposed to higher risk areas like direct lending and opportunistic credit.

Private equity remains the largest fee-earning category in the alternatives industry, but past demand for alternative credit products has increased the segment's size.

Private equity fee-earning AUM has stalled as returns have faltered, deployments have diminished, and ongoing realizations have reduced the amount of capital at work. As such, most of the growth in fee-earning AUM has been coming from other categories.

The share of fee-earning assets held by the seven largest alternative-asset managers that we track has expanded from 21% at the end of 2020 to 29% at the end of 2025, aided primarily by the growth of alternative credit and real estate/real assets funds.

Across strategies, deployments have not been enough to keep dry powder from piling up.

Most managers came into 2025 expecting deployments and realizations to pick up more substantially, especially based on improved results in the back half of 2024, but fiscal and tariff-policy uncertainties limited the level of deployments until the end of the year.

Lower short-term rates and more amenable regulatory and market environments should provide opportunities for deployments and realizations down the road, with the largest players looking to put more of their dry powder to work and cash out of legacy positions.

We expect much of this excess capital to be deployed as we move forward, with possibilities to put money to work likely increasing in the near term as equity and credit market disruptions tied to AI and the Iran war create opportunities in some segments.

The biggest standalone alternative managers have been taking a larger share of industry fundraising. We expect this trend to continue as investors gravitate more to firms with strong brands, better performance, higher levels of AUM, and larger funds.

The private capital market is quite fragmented. Our coverage, which represents seven of the largest stand-alone firms in the industry, accounts for 29% (26%) of the market on a total (fee-earning) AUM basis at the end of 2024, up from 16% (18%) at the end of 2014.

With these seven firms expected to continue to dominate fundraising efforts, we envision them gaining even more share going forward—and this does not include acquisitions, which we feel will be more likely down the road as growth slows and competition heats up.

In Europe, private equity saw its lowest level of capital raised for a decade in 2025. The absence of megafund closings played a large role. In 2025, the largest fund closed was below EUR 5 billion, compared with 2024, when approximately 50% of capital raised came from funds larger than EUR 5 billion. In Q1 2026, fundraising is tracking lower than in Q1 2025.

With most of the US-based traditional asset managers we cover being heavily leveraged to US stocks, strong market returns during 2023-25 gave them a boost, offsetting the impact of persistent active fund outflows. A down market will only compound their woes.

Several managers in our coverage have large fixed-income exposures, a stabilizer for their portfolios during periods of equity market volatility. That said, the war in Iran, with the prospect of higher inflation and interest rates, has been a negative for bond market returns.

Coming into 2025, we had expected to see more positive alternative-fund results, but the volatility and uncertainties created by US fiscal, tariff, and monetary policies, as well as economic growth, kept returns more muted, even with the Fed reducing short-term rates. While we had expected better results in 2026, the private credit scare, followed by the Iran War, has so far scuttled those forecasts.

• The US Asset Management Pulse looks at recent changes in market share, competitive standings, and industry moves.
• The annual US Asset Management Landscape examines major trends across traditional and alternative asset management.
• The quarterly European Asset Management Industry Pulse covers the latest in market news and fund flows.
• The annual European Asset Management Landscape examines larger changes in the traditional and alternative asset manager spheres.

For an under-the-hood look at the data, Morningstar Direct is a comprehensive source of investment research, portfolio analysis tools, and exclusive analytics.