Asset managers project future organic growth despite a host of challenges facing the industry, according to a Northern Trust industry study of 150 asset managers, conducted in partnership with Coalition Greenwich.
While 84% expect to grow, 22% plan “to implement changes to their operating models to achieve efficiency and cost savings.”
The white paper, The Evolving Asset Management Landscape: Only the Fittest Will Thrive, revealed “a gap between the strategic priorities of asset managers and their appetite for structural changes that could prepare firms to meet the scale of future challenges ranging from increased competition and the impact of higher interest rates to regulatory change and technology disruption.”
Grant Johnsey, Head of Client Solutions, Capital Markets, Americas, said:
“Asset managers continue to face considerable adversity, and we commissioned this study to understand how the asset management industry is evolving. Active, long-only strategies remain an important component in our clients’ investment mix. Information from this research can help guide our continued development of outsourced trading, investment operations outsourcing, foreign exchange and other solutions integrating the whole office to support the business environment of tomorrow for asset managers.”
The research shows asset managers “expect their top internal challenges over the next three years to include performance (59%), talent management (50%) and rising costs (44%).”
When asked how they expect “to achieve efficiency and cost savings, 63% said they would deploy new technology.”
Gerard Walsh, Global Head of Capital Markets Client Solutions, said:
“Addressing the internal challenges facing managers will require skill and a diverse mix of capabilities to continue on their growth course. Managers plan to deploy new technology and implement more cost-effective operational approaches, which can be difficult to do in a contracting market. In the next phase of the cycle, it seems likely that firms will seek more ways to develop orchestrated ecosystems that support their alpha generation activity. We believe firms that assess their entire value chain of activities will benefit from recent evolution of traditional outsourcing models into new areas. This will help them deliver their strategic growth priorities.”
The white paper recommends “that asset managers take a holistic view of efficiency that includes outsourcing some or all processes and more deeply integrating the front, middle and back office of the investment organization.”
Stephen Bruel, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of the report said:
“While there are many unknowns in the current environment, one item asset managers control is their operating model. Rethinking and rebuilding with flexibility, growth and cost in mind can help bridge the gap between where firms currently stand and where they need to be.”