In the current turbulent envrionment, cost control followed closely by risk and compliance issues, and geographical expansion are main areas of concerns for asset managers, according to Northern Trust’s White Paper – Driving Growth in Asset Management: Solutions for the Whole Office in 2020 and Beyond.
The survey of 300 global asset management firms, which was conducted for Northern Trust by WBR Insights, shows asset managers are struggling to balance growth strategies with escalating costs and fee pressures. Around 87% said their key strategic objective for the next two years will be controlling costs, while nearly as many (86%) also expect to focus on risk, compliance and resiliency.
In addition, 49% are planning on entering new markets to drive distribution growth. Continental Europe tops the chart for the greatest opportunities at 31%, closely followed by the US,29% and the UK, 20%. In terms of products, the majority of those canvassed said their investors preferred a regulated funds structure and domicile.
In general, 64% of those polled plan to leverage new technologies to achieve their overall major objectives while 55% expect to change product strategy with 41% citing mergers and acquisition action.
Managers are also exploring the range of outsourcing options to drive efficient growth and strengthen fundamental processes. For example, 85% of respondents have either already outsourced their trading desk or are interested in doing so in the future. Nearly half or 45% are considering it for data management in the next two years while approximately one-third are thinking of doing the same with foreign exchange and middle office functions.
“Driving profitable growth beyond 2020 will require more than finding new streams of revenue or reducing costs,” said Ryan Burns, head of Global Fund Services (GFS), North America. “The most successful asset managers are rethinking their operating models from the perspective of their whole office, seeking holistic changes such as outsourcing that can help them grow their businesses.”
“Asset managers today want true flexibility to choose the best partners for their investment processes,” says Clive Bellows, head of GFS EMEA. “For example, they want to be able to select an order management system, or a foreign exchange provider, or a trading solution that fits the way they work. Decisions that ultimately help drive alpha today are focussed on optionality and interoperability.”