This year, competitive market pressures are stronger than ever, and volatility looks here to stay for a while yet, putting the onus on smaller and emerging asset managers to find new ways to adapt. These conditions can stimulate new energy, new thinking, and new approaches to counter the challenges. Furthermore, they deliver value not just to investors but to society as well as the planet. As we slowly come to the end of this year, let us look at the main asset management trends in 2023 so far.
01 Persisting Inflation
Inflation being at multi-decade highs is having a significant impact on the operating costs of asset managers, from technology and data costs to salaries. It is pushing the industry to re-evaluate processes, operating structures, and their technological cost of ownership in a bid to keep costs down. The inflationary environment and volatility in markets could have raised concerns among those saving for retirement. Still, rising interest rates presented an opportunity for asset managers to revisit their retirement income solution offerings. It was expected that the asset managers would come up with new ways to make money from investments again. Some examples are mortality credit pools, capital markets solutions that match annuity exposures, or products that mix managed drawdown solutions with deferred income annuities.
02 ESG Reporting
The “two-dimensional” investment challenge of balancing risk and return has gotten trickier as managers try to balance a “third dimension” in the form of ESG and sustainability commitments. Asset managers increasingly integrate ESG factors into their investment decision-making processes, demonstrate transparency, and deliver ESG-aligned solutions to attract and retain clients. Interest in ESG funds has increased exponentially in recent years. But it is not just inflows that have been increasing. As policymakers turn their attention to ESG concerns, there has been increased pressure for asset managers to provide more data and consistent reporting around ESG investments.
03 Providing transparent Reporting
Transparent reporting is a vital contributor to investor retention, especially when performance has been struggling. The benefits of customisation, liquidity, transparency, cost, and value for money were driving the next wave of growth in the form of active strategies. Investors need reassurance that any underperformance was temporary, especially with strategies that are prone to volatility and require a full cycle to deliver. Feeling confident that they are not being misled or that anything is being hidden is always crucial.
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04 Technology Adoption
By harnessing advanced tools and platforms, asset managers can enhance their investment strategies, optimise portfolio management, and provide clients with real-time insights and personalised solutions. Embracing FinTech solutions, such as robo-advisory platforms and digital engagement channels, enables asset managers to cater to the evolving needs and preferences of tech-savvy clients. Additionally, adopting emerging technologies like artificial intelligence and machine learning helped asset managers uncover new investment opportunities, streamline processes, and improve risk management.
05 Rethinking data Strategies
As firms looked to find operational efficiencies, asset managers were reflecting on their data strategies in order to break down internal data silos and improve the quality of the data that is used for portfolio analysis and client and regulatory reporting. Data is also the fuel behind comprehensive performance and risk reporting. Being able to aggregate data rapidly across systems has helped managers quickly identify the performance drivers and detractors within a portfolio, along with gaining a deep understanding of exposures and risks.
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