Asset managers’ outlook for growth may mean looking inward first

Asset managers are navigating a difficult terrain, and to keep up in this landscape, they must adapt. As a result, many managers are evolving their operating models to improve the investor experience. This was illustrated in a recently published survey of 300 global asset managers from Northern Trust and WBR Insights, which found, for example, that 95% of UK respondents identified improving the investor experience as a key strategic priority in the next two years. It was by far the highest priority for UK-based asset managers participating in the survey. 83% of global respondents aim to achieve their two-year priorities by ‘changing product strategy’ and an additional 75% are planning to ‘refine their operating models’.

In prior surveys conducted by Northern Trust, controlling costs was a top priority for asset managers, yet this year’s results illustrate a changing mindset: ‘right product, right fit’ is the new approach. While cost containment continues to be important, asset managers are increasingly focused on the quality and accuracy of their products to improve their investor experience and honing their distribution strategies and data management capabilities to target the right audiences. Managers that continue to focus on cost savings are looking to leverage outsourcers to more efficiently manage their data analytics and technology needs.

Maximising through targeted distribution

Expanding distribution continues to be a journey for asset managers, but this year’s survey revealed that sufficient growth requires pursuing the right products, markets, assets and investors at the right time. For example, in Europe, this may include focusing on new fund products such as the UK Long-Term Asset Fund (LTAF) and European Long-Term Investment Fund (ELTIF) 2.0 fund structures, which are of growing interest to both managers and investors.

But entering new asset classes can come with a price: increased complexity. To combat this, many European managers are looking at refining their operating models to achieve their priorities. Others are turning to improved technology to focus their distribution channels, which is the most popular response to the question of how managers will achieve their distribution goals.

Data is the common thread

As managers seek the right products for their investors, they are looking to leverage data tools to inform their decision-making. These tools can help them understand where their expertise will make have greatest impact or where they may need to pull back on products that have the opposite effect. High-quality data can enable a higher-quality product, and in turn, an enhanced investor experience – but many managers struggle to manage their data with outdated systems and limited resources.

This notion was supported in the survey, which found that data management continues to be one of the biggest hurdles that asset managers face in driving growth and launching new products. Further, the ability to comprehend their data more effectively was demonstrated in the survey, which found that 44% of respondents identified that ‘ensuring that the data is easily understandable/ consumable and insightful’ is their biggest data management challenge. It is crucial that managers are able to digest and analyse their portfolio information quickly to enable them to 'double down' on successful distribution strategies.

With the goal of improving their accuracy, and ultimately, the investor experience, asset managers are increasingly engaging with service providers for advanced data analytics and management tools. When asked which areas managers were considering outsourcing in the next two years, an overwhelming number chose data management (83%), with some managers enhancing their data management strategies by engaging their custodians for outsourced solutions. For example, managers are turning to data science solutions that allow them to digitise their investment processes or combine trade data with behavioural science to identify decision patterns over time. These capabilities are readily available through service providers and can be slotted into each firm’s existing operating model.

Looking inward for the best outlook

This year’s survey found that as asset managers continue to maneuver through an ever-changing landscape, their focus has shifted inward to meet the needs of their investors with the ‘right product, right fit’ approach.  To thrive in today’s environment, managers are focused on improving the quality and accuracy of the products they offer, evolving their approaches to distribution and leveraging outsourced partners for improved data management and analytical capabilities.

To learn more about the insights from this year’s survey, download the full white paper, The Next Chapter in Driving Growth in Asset Management here.