Celent has released a new report titled The Little Big Story of Asset Management. The report was written by Jay Wolstenholme, senior analyst in Celent’s Securities and Investments practice.
Macroeconomic factors continue to influence the buy side and asset managers. Low/negative interest rate environment, high-cost operating environment, and increased operational demand from clients and regulators are all exogenous factors forcing the buy side business model to evolve. And only the adaptable, strong and efficient will evolve and survive.
This has fostered the factory/ boutique industry paradigm on the buy side. The factory/ boutique paradigm applies both to the investment side of the business and the vendor side.
The large investment managers grow larger offering across the board investment products, expanding internationally, and expanding into the complete AUM levels of wealth management. Fees can be lowered and services made more efficient due to economies of scale.
In parallel, the larger technology vendors are providing lower-cost front-to-back solutions, continually expanding their client base up and down the AUM levels. This access to abundant and lower-cost asset management technology allows specialty asset management boutiques to flourish. Highly focused investment boutiques can access infrastructure/operations and technology at sustainable cost levels as never before.
Additionally this enables speciality technical analytical shops to focus on specific investment analysis/risk and utilize and connect with core technology through open interfaces, being able to leverage core infrastructure rather than being burdened with having to provide it.
The factory/boutique paradigm has evolved across multiple other industry groups and is currently unfolding across the buy side and financial markets.
“Within the buy side, significant transformation is afoot. The multitude of operational and technical sourcing options readily support the internalization and diverse asset allocations client are demanding up and down the AUM ladder,” comments Wolstenholme.
