At the rate the entire asset management industry is changing, the idea of a “traditional” asset manager may be only a memory in the not-so-distant future. This time, the change isn’t about a ripple or an evolution of what we’ve always done, but a revolution and reinvention of the whole industry.
Business revolution and reinvention can feel like big, nebulous ideas that are hard to pinpoint or visualize in practice. So, let’s put it this way: today’s asset managers may do well to think a bit like the transcendent talent David Bowie. Before you raise an incredulous eyebrow, consider this: David Bowie built his career on pushing boundaries, diversifying his talents and reinventing his approach. While asset managers may not be producing albums and art, understanding this concept of totally redefining what you do and how you do it could be the key to asset managers thriving amidst the “ch- ch- changes” to come.
This Bowie-inspired idea of reinvention is one that’s at the heart of where the asset management space is today and where it’s heading as we approach the future of finance. But, why now?
There’s no denying that managers across the investment sector are under incredible pressure: pressure to generate higher returns, pressure around fees, pressure from new regulations, pressure from competitors, pressure to explore new strategies – the list goes on. These pressures combine to force more than a change for asset managers. In fact, we see the industry on the brink of a transformation.
One of the primary ways we are seeing asset managers flex against these pressures is to innovate and transform their investment strategies by pushing into new asset classes – think Bowie’s shift from his glam rock origins to a soul-inspired reinvention with Young Americans. Particularly in the active space, managers are moving away from more traditional assets like equity and fixed income, and turning to complex derivatives like swaps, options, futures and private equity strategies. Of course, an investment manager doesn’t wake up one morning and decide, “Today’s the day we start working in complex derivatives.” Most firms’ operational environments simply aren’t set up to do this.
A change in strategy that moves from traditional investing to multi-asset class convergence requires a transformation of a firm’s operations.
There is no single solution that acts as a magic wand to wave over your firm and transform your ability to execute a multi-asset class investment strategy. One of the keys to future-proofing your strategies and your firm is bringing the best fit-for-purpose solutions together so that, while you may have complex strategies and systems underpinning your investment performance, your clients don’t feel that complexity. Clients simply “enjoy the show” – the investor experience and returns.
Take investor reporting as one example. Your clients don’t care about how many systems you have in place, they care about the value of their portfolio. Regardless of how many different asset classes you trade in or technology products you use, the art is in how you integrate – not simply connect – all the underlying systems. Leveraging technology to truly integrate portfolio management, risk management, reconciliations, corporation actions to gain a standard data output will give your investors a unified view and can differentiate you from the competition. Ultimately, this kind of strong technological foundation gives you a platform to shape smarter performance.
As you continue to seek better returns and margins, and as you explore investment strategies that have the potential to transform your firm, ensure that your operations and platforms are flexible and scalable enough to support multi-asset class convergence. With so much pressure on asset managers to innovate and optimize, they’ll need to be.
As you consider the mandate to reinvent your firm and investment approach, challenge yourself to think a little bit like the late, great David Bowie. As he sang in his iconic song ‘Changes,’ “I watch the ripples change their size but never leave the stream.” Future-ready asset managers know: you can’t afford to be a ripple.