Asset managers expect organic growth, Northern Trust whitepaper reports 27 June 2023US Reporter: Lucy Carter
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A recent whitepaper from Northern Trust and Coalition Greenwich has found that 84 per cent of asset managers expect to see organic growth in spite of industry challenges.
In “The Evolving Asset Management Landscape: Only the Fittest Will Thrive”, the most pressing internal challenges over the next three years were cited as performance, talent management and rising costs. The report also references future challenges including increased competition, regulatory change, rising interest rates and technology disruption.
Around technology, 63 per cent reported that they would deploy new technology to improve efficiency and cost effectiveness. However, strategic priorities and the appetite for structural change amongst asset managers were found to be disparate. Only 22 per cent expect to make changes to their operating models, despite their high growth expectations.
The report recommends that asset managers take a more holistic view of efficiency, engaging outsourcing strategies and integrating the front, middle and back offices. Whitepaper author Stephen Brunel affirms that asset managers need to reconsider their operating models in order “to bridge the gap” between their current positions and where they need to be.
Grant Johnsey, head of client solutions for capital markets in the Americas at Northern Trust, says: “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.”
Gerard Walsh, global head of capital markets client solutions at Northern Trust, comments: “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 the recent evolution of traditional outsourcing models into new areas. This will help them deliver their strategic growth priorities.”
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