New report explores how asset managers can create greater efficiency

By Gaia Lamperti

A global survey of 300 investment managers shows how new operations models, changing investment strategies and emerging asset classes impact the wealth management industry. Asset managers are most concerned about creating efficiencies across their operations in the next two years, followed closely by a focus on cost and enhanced quality and accuracy, according to the study commissioned by financial services company Northern Trust.

The survey, ‘The Next Chapter in Driving Growth in Asset Management‘, offers insights into how asset managers are leveraging technology and outsourcing functions from front to back, including investment decision support activities and data management. Most of the issues they are facing date back to 2020, when for the first time, the pandemic caused many to look harder at outsourcing as a solution.

“As we are coming out of a two-year pandemic in which operating models were strained or challenged, there has been a renewed focus on efficiency, and how talent and technology can enable that,” said Ryan Burns, Head of Global Fund Services, North America. “The most successful asset managers are leveraging new technologies and operational approaches, while also seizing the benefits of outsourcing, to enable more efficient and effective decision-making.”

While 50% of respondents said their key strategic priority for the next two years will be creating greater efficiency, nearly as many (47%) also plan to focus on cost control and 45% said enhancing quality and accuracy was a top priority. The new way of working following the global pandemic has influenced investment managers’ views about outsourcing. Particularly, respondents said the remote work environment (60%), cost of maintaining in-house capabilities (52%) and staffing challenges (51%) have increased their likelihood of outsourcing.

Earlier in the year, The European Security and Markets Authority (ESMA) published a document with the key priorities for the asset management industry in 2022, which mostly focused on sustainable finance and systemic risk. The priorities are critical for the wealth management industry to overcome the challenging environment in the markets, new regulations and today’s competitive landscape.

“There are many challenges facing managers – employee turnover, staff returning to offices, managing costs,” explained Caroline Higgins, Head of Hong Kong, Macau and Taiwan. “With so many questions to be answered, the way forward is to look at all of these in a holistic manner covering people, technology, services and regulations. Our clients are proactively thinking of how to streamline their operations, and they have turned to outsourced providers like Northern Trust who can help them leverage technology to suit their business goals and objectives.”

Data management is seen as the area with the most potential for outsourcing, with nearly half (48%) of respondents considering outsourcing data management in the next two years. Approximately one-third are considering outsourcing foreign exchange, securities finance and middle office functions, and one in 10 say that supporting growth in crypto/digital assets is a priority, according to the survey.

“Asset managers today want flexibility to choose the best partners for their investment processes,” added Clive Bellows, Head of Global Fund Services EMEA. “For example, they want to be able to select a trading solution, or a foreign exchange provider, or a data management capability that fits the way they work. This optionality can support decisions that ultimately help drive alpha.”