After a challenging 2025, asset managers will continue to deal with competing demands across products and asset classes this year, according to a Cerulli report, released Thursday.
Separate account strategies are expected to grow in use across channels and direct indexing providers “have an opportunity to partner with wealth platforms that cannot build the capabilities themselves,” the research firm said in “The Cerulli Report—U.S. Product Development 2025: Building Across Competing Priorities.”
“Asset managers have an opportunity to help advisors access tax-advantaged solutions, including via separate accounts,” according to the report.
“Advisors currently allocate 8.6% of their clients’ assets to separate account product, on average, although this percentage is far higher in the wirehouse channel,” the report notes.
Model-delivered retail separate managed account (SMA) assets continue growing at a more rapid pace – a 25%, five-year compound annual growth (CAGR) through 2024, the report points out, contrasting these to manager-traded strategies that are growing through direct indexing and fixed-income strategies.
Direct indexing strategies grew year-over-year by 44% in 2024, and the direct indexing market reached $1 trillion in the second quarter of last year, with Morgan Stanley’s Parametric in the lead.
The report goes on to say, “Offering SMA strategies is an important component of managers enabling advisors to customize solutions for their clients in an environment where advisors must compete to retain wealthier clients.”
Addressing dual-share-class ETFs, the report says that 80 managers have filed for these products, but wealth management home offices express concerns about supporting them, indicating that uptake could be slow.
The research findings were “based on a survey of product development executives across asset managers combined with data from our advisor survey, as well as executive interviews,” a Cerulli spokesperson said Friday.
“A critical finding from the research is that tax optimization has become more important to asset managers.” — Daniil Shapiro, Director, Product Development, Cerulli
“A critical finding from the research is that tax optimization has become more important to asset managers,” Daniil Shapiro, Director, Product Development at Cerulli and the report’s lead author, told WSR by email.
“Relative to prior years, a greater portion of asset managers (48% in 2025) report tax optimization to be a significant factor to the products they offer advisors,” Shapiro said.
“Key asset management industry initiatives, including the build out of active ETFs, ETF share classes for existing mutual funds, provision of direct indexing, and tax-managed long/short-SMAs all have a component of offering advisors and their clients improved tax efficiency.”
He added, “After a long upswing and tremendous wealth creation in markets, tax optimization is proving to be a key value proposition and differentiator that asset managers can offer.”
Addressing tokenization, the firm said in a press release that it will receive “tremendous” attention but beyond obvious use cases it will develop over the long term. The current tokenization use cases are primarily in money markets and cryptocurrency ETFs.
Shapiro said, “Pursuing partnerships with blockchain-focused firms could benefit those lacking in-house expertise. Beyond the largest managers and custodians, taking a wait-and-see approach to tokenization may also work well.”
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
