As a semblance of stability descends on the investments industry, Andy Butler and Sung Hyun Lee from our specialist asset management team spoke to a number of COOs from our asset management and asset owner clients. Their goal was to understand the extent to which COVID-19 has begun to reshape their strategic considerations. This is what they learned.
The fundamentals of the industry remain intact, and so too do many of the prevailing headwinds faced pre crisis:
- Asset managers are expected to continue consolidating.
- Asset owners continue to explore bringing some investment activities in-house.
- For asset owners, public assets can no longer support growth targets. Private assets are to become an increasingly important asset class, bringing their own operating model considerations.
- Meeting the demand for and evolution of ESG strategies, enabling responsible diversification of portfolios, is essential.
- Pressure on fees and hence margins across the industry continue to grow in prominence.
New and reinforced challenges
Several themes have either emerged, or been thrust into sharper focus given the disruption faced.
- Outsourcing has aided navigation through the crisis, with clients able to leverage service providers’ global operating models and scale.
- Manual processes have come under renewed scrutiny, having caused significant disruption. This focus is a central tenant of a refreshed perspective on BCP.
- The drive to transition to cloud-based solutions is expected to accelerate, however, cybersecurity remains a key concern.
- For most, the crisis has not led to a revision in the scope of a sourcing strategy.
- Hybrid working brings forth fresh considerations, with many industry participants considering the need to support optional office attendance whilst maintaining a connected workforce.
Where do we go from here?
While many of these challenges are continuations of existing themes, several stand out.
- Adapting to long term home working provides many with a fresh challenge, but also opportunities to build and retain a happier workforce. Many enjoy the obvious advantages of home working, yet it is vital to address how this changing dynamic reshapes businesses.
- Employee morale and wellbeing, effectiveness of remote management, decaying social capital, suitability of technology and long-term productivity present key obstacles that firms need to address.
- Manual processes have persisted across asset management causing operations teams great pain, with limited senior visibility. The pandemic thrust these into the spotlight.
- Taking advantage of this focus provides a renewed opportunity for automation. To manage this effectively will require the joint will of the buy side and its service providers. Good quality data and process at asset managers and asset owners will afford providers the opportunity to improve. These changes are critical for increasing the resiliency of the joint operating model in the face of future shocks.
While on the surface the investment industry remains largely the same, the world has changed. How firms now choose to recognise and react to these changes may well shape all our futures.