Funds Congress Highlights

With technological advances and a reinvigorated focus on client demands driving ongoing transformation in the asset management industry, this article explores the major factors influencing decision-making by CEOs and investment firm leaders in the coming year. Amid the continued democratization of private markets and a search for scale on the back of consolidation pressures, innovation, client engagement and responsible leadership will be key in driving the industry forward.

Strategies for scale and efficiency: It is far from easy for investment firm leaders to find the right balance between structuring an operation that is global in scale, yet capable of significantly granular customization within individual markets. For most firms, investment platforms must be global in scope, yet demand continues to rise for bespoke solutions tailored to the regulatory context and specific client needs of individual jurisdictions. Technological solutions may be the only way to square the circle.

The pitfalls of consolidation: M&A activity that combinestwo businesses with significant overlap may appear to offer a shortcut to scale too tempting to ignore, but the advantages enjoyed in the form of cost synergies can easily be outweighed by a loss of agility or by client dissatisfaction in the face of reduced choice. Industry leaders need to think carefully before embarking on the journey to consolidation: for a business combination to succeed, it should be based on the benefits brought to clients, not on mere cost savings.

Prevalence of client-centric approaches: Asset managers are increasing caught up in an industry-wide transformation in which they are no longer seen as simple product providers: they must become solution providers. To do so successfully, firms need to engage to a far greater degree with their clients to really understand client perspectives, needs and objectives. A more collaborative approach among firms may also be required to allow the development of solutions surpassing the capabilities of any individual firm.

The democratization of private markets: The continued opening of private marketsto retail investors will present significant new opportunities in the coming year, particularly in light of work to create evergreen funds structured for the retail market and the current focus by regulatory authorities on the establishment of safeguards for retail investors. After all, the entire industry bears a responsibility to ensure that products are clearly explained and appropriately targeted to different investor segments.

The UK’s investment challenge: Overturning theUK’s culture of risk aversion is likely to require macro- and micro-economic measures, ranging from refreshed government policy to regulatory reform. Incentivising investment in domestic infrastructure lies at the heart of the issue: partnerships with capital owners, such as pension and insurance funds, may unlock long-term capital that helps establish a more attractive environment for domestic investments.