Performance, talent and costs among top challenges for asset managers

Asset managers project future organic growth despite a host of challenges facing the industry, including performance (59%), talent management (50%) and rising costs (44%) being the three most expected internal challenges over the next three years, according to a study.

The white paper, “The Evolving Asset Management Landscape: Only the Fittest Will Thrive”, conducted by  Northern Trust in partnership with Coalition Greenwich examined 150 asset managers and found that while 84% of managers expected to grow and 22% planned to implement changes to their operating models to achieve efficiency and cost savings.

On top of that, when asked how they expected to achieve efficiency and cost savings, 63% of examined asset managers said they would deploy new technology.

“Addressing the internal challenges facing managers will require skill and a diverse mix of capabilities to continue on their growth course,” Gerard Walsh, Global Head of Capital Markets Client Solutions, said.

“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 study also 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.

“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,” Stephen Bruel, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of the report said.

According to the report, asset managers should 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 organisation.