Assets all over the world: Only few players.

source: Visual Capitalist

The global economy is currently experiencing an unprecedented amount of liquidity, with central banks around the world pumping trillions of dollars into the financial system in response to current world economic condition. While this flood of liquidity has helped to prop up financial markets and prevent a total collapse of the global economy, it has also raised concerns about the potential long-term consequences of so much money sloshing around in the system.

As of 2022, the entity with the largest assets under management (AUM) in the world is BlackRock, a global investment management company based in the United States. As of December 31, 2022, BlackRock's AUM in total $8.68 trillion USD. It's worth noting that there are other types of entities, such as sovereign wealth funds and central banks, that hold significant amounts of assets. For example, as of 2021, Norway's sovereign wealth fund, the Government Pension Fund Global, had AUM of around $1.3 trillion USD. However, asset managers like BlackRock and Vanguard are still among the largest holders of assets in the world.

An excessive amount of assets, particularly if they are concentrated in a few large entities, can have several impacts on the global financial system and the wider economy. Entities with large amounts of AUM can wield significant market power, influencing the prices of securities and other assets they invest in. This can potentially distort market competition, especially if the entity holds a large stake in a particular industry or company. Large asset holders can use their significant market power to influence the behavior of companies they invest in. By applying Environmental, Social and Governance (ESG) criteria in their investment decisions, they can incentivize companies to adopt more sustainable business practices and contribute to a more responsible and sustainable economy.

Another risk of excessive liquidity is asset bubbles. When interest rates are low and there is a lot of cash available, investors may be more inclined to take on risky investments in search of higher returns. This can lead to speculative bubbles in asset classes such as stocks, real estate, or cryptocurrencies. When these bubbles eventually burst, it can lead to widespread financial instability and economic hardship.

Furthermore, an excessive amount of liquidity can lead to a misallocation of resources. When there is too much cash available, it can be easy for businesses to access funding for projects that may not be economically viable in the long run. This can lead to overinvestment in certain sectors and an underinvestment in others, which can ultimately harm the overall health of the economy.

Finally, the flood of liquidity can exacerbate income inequality. While low interest rates and government stimulus measures can help keep businesses afloat and preserve jobs, they may also lead to a concentration of wealth in the hands of the wealthiest individuals and corporations. This can further widen the gap between the rich and the poor and contribute to social and political unrest.

In conclusion, while the current liquidity in the global financial system has helped to prevent a total economic collapse during the pandemic, it has also raised concerns about the potential long-term consequences of so much money in circulation. Policymakers will need to be vigilant in monitoring inflation, asset bubbles, and resource allocation to ensure that the benefits of this liquidity are shared fairly and do not come at the expense of long-term economic stability.