A recent report by PwC predicted that one in six asset managers would close or be acquired by 2027 highlighted the challenges that the industry faces today.
The inaugural Acuiti Asset Management Insight Report, a new quarterly report based on a survey of Acuiti’s Asset Management Expert Network – a group of senior derivatives-focused executives from asset managers across the globe, found that rising cost bases, regulation and fee compression were the top challenges for firms in the current market.
Today’s challenges come after a decade of disruption in the market in which the rise of passive investment products has forced firms to innovate, reduce costs and develop new strategies to compete.
Despite the challenges that firms face, the Acuiti Asset Management Insight Report suggested that firms were on the front foot when it came to innovation and investment.
Over half of respondents said they saw opportunity for growth in profitability coming from the deployment of new strategies and investment in technology. Further down the list were defensive actions such as consolidation of office space and reductions in headcount.
In addition, just over a third of respondents were planning to increase headcount in their derivatives business over the next 12 months with operations and business development hires topping the list of targets.
Firms were also planning to increase efficiencies through investment in technology. 95% of respondents were investing in data management to increase efficiency across workflows with over half doing so with a third-party software vendor.
When it came to the provision of third-party software serving the asset management market, members of the Expert Network were generally happy with what was on offer. Front office software and post trade were seen as the areas in which there was the most opportunity for new entrants.
The good news for asset managers is that the return of volatility and two-way risk to the markets since 2020 is increasing the demand for active products. 42% of respondents said that they had seen increased demand for active management over the past three years.
The market for asset management is likely to remain challenging. However, challenging conditions provide an incentive to invest in efficiencies across multiple areas from automation of manual processes to the development of new products.
The firms that win out between now and 2027 will be the ones that invest wisely today.
Download the full report here: https://www.acuiti.io/q2-2023-asset-management-insight-report/
