the capital requirements regulation ) to ensure they are not serving as a disincentive to long - term financing. a second set of initiatives concern securitisation. the very word securitisation has become tainted by the crisis. pre - crisis, there were too many examples of over - opaque, overcomplex, under - collateralised products delivering nasty surprises to end - investors. but, slowly, the market is being rehabilitated and reconstructed in a different image, helped by public and private sector initiatives to improve transparency. one element of this would be the creation of a new class of securitisations which clearly differentiate themselves from the mistakes of the past. a “ high - quality ” securitisation product might comprise much simpler structuring of payoffs and high and transparent underwriting standards. so - designed, such a lower risk securitisation might benefit from preferential regulatory treatment. work is underway both internationally and in europe to design criteria for high - quality securitisations fitting this bill. with international colleagues, the bank intends to support actively these important initiatives. if successful, the prize for regulators and asset managers is a big one. for regulators, it would enable non - bank investors to do more of the heavy lifting when financing the wider economy. this is particularly important in europe where, at present, companies are very bank - reliant for their financing. for asset managers, it would have the potential to offer both duration and yield, thereby helping them meet the needs of end - investors. conclusion it is often said that banks are special. compared to banks, asset managers generate a completely different risk and opportunity set. but they, too, are special both for the financial system and the wider economy. as they grow in scale and importance, that specialness is likely to increase further. the age of asset management may be upon us. academics, practitioners and regulators have been studying banks, their behaviour and failure, for several centuries. analysing and managing the behaviour of asset managers is, by contrast, a greenfield site. the risks and opportunities asset management poses, while different, could be every bit as important. to avoid the pitfalls of the banks, this greenfield site will need to be cultivated carefully. bis central bankers ’ speeches chart 1 total aum of us insurance companies, pension funds, mutual funds and other funds, 1946 – 2013 icpfs mutual funds ( a ) other non - property funds per cent of gdp chart 2

have come of age – we may be about to enter the age of asset management. as important as the absolute scale of the asset management sector is its composition. on the assets side, a number of important trends are at play. one is the rapid growth in specialist funds, often investing in less liquid asset classes. this is evident in the growth of so - called alternatives, such as hedge, private equity, real estate, infrastructure and commodity funds. these have risen from under $ 2 trillion aum in 2003 to over $ 6 trillion by 2012, or from 5 % to 10 % of global aum ( boston consulting group ( 2013 ) ). accompanying that, there has been strong growth in funds active in specialist, often illiquid, markets – for example, high yield bond funds and emerging market funds. since 2008, these funds have grown at an annual rate of around 40 % per year, outpacing growth in the global mutual fund industry by a factor of four ( chart 4 ). 3 also rising rapidly have been flows into us mutual loan funds, which spiked to $ 63 billion in 2013 having averaged $ 15 billion in the preceding three years. a second striking feature has been the rise in the importance of passively managed funds, including exchange traded funds ( etfs ) and other index - tracking strategies. these passive or tracking funds have risen from $ 2 trillion in 2003 to almost $ 8 trillion by 2012, a rise in global market share from 5 % to 13 %. within this, etfs have been growing at an annual rate of around 30 % for the past decade with aum currently standing at $ 2 trillion. a third trend – the mirror image of the first two – has been the declining share of actively managed funds operating in large - cap equity and government fixed income markets. their slice of the global aum pie has fallen sharply over the past decade, from two - thirds to around a half. for some institutional investors, this is part of a longer - term trend towards “ deequitisation ” – a dreadful word – to which i will return. the reasons for these shifts in portfolio allocation are not difficult to fathom. like many advanced economies, the asset management industry is facing its own version of the “ squeezed middle ”. active funds operating in core markets, in the middle of the risk / return distribution, are feeling the pinch : from above, due to the rise of alternative funds and strategies seeking higher return in a low yield environment – the search