“Choppy conditions”: How are asset and wealth management firms weathering geopolitics, technology and innovation?

The future of asset and wealth management is under constant challenge. From economic and geopolitical shifts to innovations inside and outside the sector, business leaders and teams need to adapt – fast – in order to survive. So what does the future look like for asset and wealth management firms? We spoke to Erich Gerth, CEO at RBC BlueBay, to find out what the business’ priorities are now and years down the line.

How do you feel about the current macroeconomic outlook?

Despite market headwinds, 2024 was a strong year for us driven by a meaningful uptick in inflows where we were able to take advantage of the fixed income tailwind. We expect this theme to play out well into the year as investors navigate the complexities of rate changes, the underperformance of equities and Trump administration policies.

Looking to the year ahead, we believe policy and politics will continue to create pockets of volatility meaning that investors need to be dynamic and nimble when it comes to portfolio construction. We also believe that such market volatility and the associated uncertainty will be beneficial to a firm such as ours that has a strong heritage in alternative fixed income.

For example, our hedge fund and illiquid platform has become increasingly appealing to investors who are looking for downside protection, while also looking to capitalise on the mis-pricings and inefficiencies regardless of the market direction.

This sentiment is echoed by our latest report ‘Shifting strategies: How institutions are embracing fixed income hedge funds’ which found a growing appetite for alternative fixed income strategies amongst senior investment decision-makers from asset owners across the US, Europe, and Asia.

On the equities side, with changes in US government policy creating choppy conditions in global markets, the need for diversification in portfolios could be beneficial for us considering our equity specialisms.

What investment trends and product innovations are you interested in this year? Where do you see the opportunities?

While not a trend per se, the seismic shifts that we are facing at both a market and macro-economic level, will continue to deliver a wake-up call to investors in terms of the case for active over passive management, particularly off the back of extended low rates and low volatility.

As we have witnessed, ongoing noise and policy announcements from the new US administration are now a key feature of everyday life and a driver of market volatility, while investor uncertainties around the paths of growth and inflation continue.

We believe that now is the moment for active investment management to prove its value and alignment to client needs, particularly strategies focused on long-short investing.

What are the biggest challenges to your business?

Advancements in AI is arguably both a headwind and a tailwind for all investment management firms across the industry. From justifying trades and improving operational efficiency to portfolio modelling and risk mitigation, there is little doubt that generative AI will result in big changes in our industry over the coming years, particularly for those ramping up technology spend to stay competitive.

But the cost of implementation is considerable. Generative AI capabilities are not without risks, and we fundamentally believe in human + machine is optimal as an active asset manager. For us, this means leveraging the strength of our parent company – RBC is currently ranked in the top three for AI maturity among 50 global financial institutions – who are currently looking at various ways in which AI can be applied in both a safe and fair manner.

How do you envision the next 10 years for your business?

Currently, our mission at RBC BlueBay is to be Europe’s leading active manager –one that we are making solid progress against with a strong and growing physical footprint.

Looking ahead, we also recognise that we are also part of one of the largest, global non-U.S. banks in the world with a strong European presence across capital markets and wealth management, in addition to investment management. This, we believe opens a world of opportunity for our firm. Over the next few years, a key area of focus for us will be around combining our experience and knowledge across these businesses, utilising this elevated platform to accelerate our collective success in Europe.

Finally, culture will continue to be critical for us as it underpins everything. As CEO, I believe one of my main responsibilities is to create a platform for others to succeed and to ensure that we have a culture that attracts and retains the best talent.

What are you looking forward to the most at IMpower FundForum?

Having returned to the event in 2024 after a few years’ gap, I realised how unique IMpower FundForum is in terms of the opportunity it provides to network with peers and clients – all united in one place. I also think the gathering offers unparalleled insight into some of the most pertinent topics impacting our industry.