Christopher Davis at ISS Market Intelligence lays out a blunt five-year roadmap for the retail fund industry: slower growth, continued passive adoption, and a dramatic broadening of the product shelf. U.S. equities have driven the bulk of asset growth over the past decade, but forecasts now point to more modest returns. Slower asset growth will translate into weaker revenue growth for firms heavily exposed to domestic equity funds, making business-model choices more consequential.

Active-to-passive rotation remains a structural headwind. Davis says active share of flows could fall from roughly 60% at the decade’s start toward near 40% by decade end. The response will vary. Some managers will double down on scale and low fees. Others will pursue differentiated capabilities in fixed income, international equities or private markets where forecasts expect healthier returns than the past half decade delivered.

The product explosion matters. Active ETF launches are running hot, with more than 500 introduced this year and roughly 1,500 in SEC registration. Managers are also experimenting with buffer structures, crypto exposures, single-stock leverage and semi-liquid vehicles such as interval and tender offer funds. That proliferation creates distribution and education demands. Surveys show 60% of advisors prefer ETFs when identical strategies are available. Davis argues that managers must deepen advisor relationships and invest in education to convert product choice into market share.

Private markets are rising for structural reasons: more economic activity occurs off public exchanges, demand for diversification after 2022, and a friendlier regulatory tilt toward private allocations. Entering alternatives is costly in sales and operational resources and tends to favor large specialists or scaled incumbents. Davis’s verdict is clear. The next winners will either be large-scale players that use breadth and low fees to fund new initiatives or focused specialists with real differentiation. Firms that sit in the messy middle risk losing relevance.

Source: Video - ISS MI's Report Highlights Opportunities Ahead for Asset Managers