The investment industry is comprised of a wide
variety of sectors and service providers.
At the top of the list are the giant asset managers, like BlackRock, a
firm managing $6 trillion in investment assets, an amount so immense that it is
more than the Gross Domestic Product (GDP) of Russia and India combined.
Also at the top of the industry are the
biggest exchanges, where billions of shares trade hands yearly, along with the
major investment banks, those firms that raise money for corporate clients by
selling their stocks and bonds to the public.
Investment banks also deal in private equity investments and asset
management, and they earn immense fees by brokering mergers and acquisitions.
Then there are the big firms that provide stock
brokerage services.
Some of them, like
Merrill Lynch, are also investment banks.
Others, like Charles Schwab, are primarily stock brokers that deal with
millions of individual customers.
However, the lines have blurred between sectors
in recent years.
It is common for one
firm to operate in multiple segments of the investment industry at once,
including some or all of such sectors as commercial banking, investment
banking, asset management, insurance, mortgages, financial advisory, venture
capital, mergers and acquisitions and more.
2018 was an active year in terms of companies
going public for the first time, with about 190 companies raising an estimated
$46.8 billion in initial
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The investment industry is comprised of a wide
variety of sectors and service providers.
At the top of the list are the giant asset managers, like BlackRock, a
firm managing $6 trillion in investment assets, an amount so immense that it is
more than the Gross Domestic Product (GDP) of Russia and India combined. Also at the top of the industry are the
biggest exchanges, where billions of shares trade hands yearly, along with the
major investment banks, those firms that raise money for corporate clients by
selling their stocks and bonds to the public.
Investment banks also deal in private equity investments and asset
management, and they earn immense fees by brokering mergers and acquisitions.
Then there are the big firms that provide stock
brokerage services. Some of them, like
Merrill Lynch, are also investment banks.
Others, like Charles Schwab, are primarily stock brokers that deal with
millions of individual customers.
However, the lines have blurred between sectors
in recent years. It is common for one
firm to operate in multiple segments of the investment industry at once,
including some or all of such sectors as commercial banking, investment
banking, asset management, insurance, mortgages, financial advisory, venture
capital, mergers and acquisitions and more.
2018 was an active year in terms of companies
going public for the first time, with about 190 companies raising an estimated
$46.8 billion in initial public offerings of stock (IPOs) on U.S. exchanges,
according to analysts at Renaissance Capital. Globally, $145.1 billion was
raised in IPOs on the world’s stock exchanges through the third quarter of
2018.
Mergers and acquisitions (M&A), a major
segment of the investment industry, saw a 7% increase in global M&A volume
during 2018 compared to 2017, reaching $4.0 trillion, according to the
Institute for Mergers, Acquisitions and Alliances (IMAA). U.S. volume for the period increased by 9% to
$1.9 trillion.
Meanwhile, large numbers of bond offerings were
completed during 2017, taking advantage of extremely low interest rates.
The
Global Investment Industry: This is
a massive, global industry, and in light of the fact that it provides the
services that enable companies to have access to capital, it is one of the most
important industries of all. Worldwide,
regulated open-end investment funds assets totaled $49.39 trillion on June 30,
2018, according to the Investment Company Institute, up from $44.78 trillion
one year earlier. The World Federation
of Exchanges estimated the total value (market capitalization) of stocks on all
of the world’s significant exchanges at $85.9 trillion as of June 30, 2018 (up
from $78.2 trillion one year earlier), with shares available in 50,158
companies.
After an extremely turbulent environment during
the recent recession (late 2007 through mid-2009), the global investment
industry has been greatly altered. Many
of the best-known brands in the industry failed or were taken over. Lehman Brothers was allowed to fail
completely. Bear Stearns was taken over
by JPMorgan Chase at a nominal price.
Global banking and investment industry leader RBS (Royal Bank of
Scotland) was bailed out with public funds to the extent that it became
controlled by the UK government.
Insurance industry giant AIG was bailed out by the American
government. The world became familiar
with phrases like “toxic assets,” and American taxpayers, whether they liked it
or not, backed emergency plans and market support programs with acronyms like
TARP (Troubled Asset Relief Program) and TALF (Term Asset-Backed Loan
Facility). By the end of 2009, the U.S.
government had created initiatives based on corporate bailouts, asset purchases,
emergency lending and financial market support totaling more than $2
trillion. These were only a few of the
massive changes wrought by the upheaval of the global financial crisis that
began quietly in the late summer of 2007 and roared into a full financial
hurricane in 2008.
By the end of the painful 2008-09 period, the
investment industry, on a global basis, had been through losses, layoffs,
scandals, bankruptcies, forced mergers, government intervention, bailouts
and/or disappointments on a scale not seen in decades. In 2010 through 2014, the investment industry
began rebuilding and reshaping its strategy, and thereafter the industry has generally
enjoyed robust business, in recent years.
Meanwhile, governments worldwide enacted a relentless campaign of
stricter regulation of virtually all facets of the investment and banking
industries.
The
U.S. Investment Industry: Employment
in firms that are involved in securities and investments was estimated at
970,900 as of October 2018 in America alone, up from 950,600 the previous year,
according to numbers published by the U.S. Bureau of Labor Statistics. About 55 million Americans participate in
401(k) investment plans at their places of work as of 2018, according to
Investment Company Institute, with assets totaling about $5.3 trillion as of
mid-2018. Mutual funds in America held
$18.4 trillion in assets as of October 2018, according to the Investment
Company Institute. U.S. retirement and
pension account assets totaled about $28.3 trillion in mid-2018.
It is interesting to note that the number of
public companies in the U.S. has been falling steadily since the late
1990s. There were 7,322 American
companies listed on U.S. stock exchanges in 1996. As of late 2017, there were only 3,671.
Increased venture capital and private equity capital has led to fewer
IPOs. Another factor is increased
regulation, shareholder lawsuits and demands from lobbyists and activists that
create a difficult climate for publicly-held companies. New issuance of stocks has also declined
dramatically. The number of IPOs in the
U.S. fell from 845 in 1996 to 275 in 2014, and approximately 190 in 2018.