For asset managers and servicers, 2020 looks promising. For the broader market, regulation has led to greater visibility and controls over what might go wrong, reducing volatility and increasing market stability. Now we can see a landscape that has signs of investment and growth everywhere you look. Here are five areas to watch:
Passive vs active funds. Pressure on fees has driven the rise of passive funds – and the rise of passive funds is, in turn, further driving down fees. There are questions about how managers can provide actively managed funds without letting costs spiral.
Scale now becomes increasingly important. To reduce costs, you need to be able to consolidate platforms and simplify operations. Integrated suites of solutions can help firms minimize the number of vendors and improve efficiency and transparency with tightly integrated platforms.
- Private markets. This area will be a gamechanger over the next five to 10 years. More and more private money is coming into the market, and that will attract retail investors as well as longer term investors like pension funds and insurers. It will also attract the attention of regulators.
Environment, social and governance (ESG). Return is always important to investors, but they are increasingly interested in investing in companies with a strong ESG program.
We’re already seeing more companies being more public about their policies, and it will become ever more important to be visible about what you’re doing to promote ESG. Asset managers may even consider ESG when selecting technology and service providers.
Managed services, including Business Processing as a Service. The buy side is an ecosystem of investors, marketers, asset servicers. So it’s well positioned to leverage best practices like BPaaS to enter new markets more quickly.
BPaaS is particularly effective in complex markets such as credit because it lowers the barrier to entry by outsourcing complex workflows that are expensive and time intensive to set up. A strong outsourcer with intellectual property, an integrated workflow and fast onboarding allows you to enter new markets and capitalize on growth opportunities quickly.
So, if you’re small, the right BPaaS provider can quickly give you a foothold without the typical costs. If you’re large, you can outsource basic services so that you can immediately focus on the value add.
Technologies that can push workflow improvements even further. Machine learning and AI offer significant opportunities to optimize and improve workflow by reducing human intervention.
But predictive analytics are becoming increasingly interesting as well. Coupled with machine learning and AI, you can do more than just accelerate workflows and identify exceptions; you can actually predict potential outcomes and behavior. That’s a competitor differentiator.
Want to explore these areas further? Talk to one of our experts and see how we’re helping our buy-side clients grow in this new decade.