The Core Is Cracking: Asset Managers Must Reboot Their Technology Infrastructure
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The undertow disrupting asset managers — the revenue and cost struggles embedded in buy side trends.
Key research questions
- Can’t everything be revenue based?
- What trends are pushing revenue?
- But what about the expense side?
Thin investment returns, shifting regulations, and tight operating margins are forcing asset managers to evolve their operational and technical business models to stay competitive. Competition among managers is fierce, and the need to differentiate themselves beyond performance, through portfolio breadth, operational efficiency, client communications, and smart marketing.
The six buy side front-to-back operations and technology trends tracked throughout 2016 and into 2017 are still very much in play.
1. Low Return Investment Environment, Multiasset Portfolios
2. Reevaluating Operational and Technical Architecture Due to Regulatory, Client Demand, and Cost Pressures
3. Increased Demand for Investment Decision Support Tools from AMs and Asset Owners
4. Growing Adoption of Systems and Business Process Outsourcing
5. Growing Exploration, Experimentation, and Interest in Use Cases for Big Data and AI
6. Asset Managers Search for Greater Volume and Direct Distribution
These trends hold up well, but within these six there is an underlying theme lurking. This certainly sounds ominous, and unfortunately in a way it is: the buy side needs to pay some back dues for not paying as much attention and effort to its full front-to-back investment processes. When investment returns were high, it was convenient to patch in manual operational processes to get past the problems, but in the current economic and investment environment this ln longer is sustainable.