Investment managers are expecting significant growth in terms of assets under management (AuM) and revenue in the next three years, according to a survey by investment management solutions provider SimCorp.
The majority of the surveyed firms cited ‘provision of superior service’ and ‘product innovation’ as the main areas of focus for supporting growth.
In the survey – Unlocking Growth Through Innovation – which was conducted by Lindberg International and was supplemented by qualitative interviews by Citisoft, representatives from 83 investment management firms from Europe, North America and Asia Pacific were asked to project their annual growth rates in the next three years.
Eighty four per cent of large asset managers (more than 200 employees) expect annual revenue growth of 6 per cent or more whereas 36 per cent of the small asset managers (less than 200 employees) indicate the same. For annual AuM, 73 per cent of the large firms and 56 per cent of the smaller ones expect a growth of more than 6 per cent.
The industry’s very positive sentiment towards growth over the next three years is surprising given that revenue and AuM growth across investment management stayed almost flat in 2015.
The survey reveals that European and Asia-Pacific respondents are more optimistic about AuM growth than their North American counterparts. Forty-eight per cent of European and 55 per cent of Asia-Pacific respondents expect annual AuM growth of more than 10 per cent compared to only 17 per cent for North American respondents.
Provision of superior service is the most predominant strategic focus area, followed by product innovation. The survey shows that less importance was placed on M&A growth strategies and geographical expansion.
Close to 50 per cent of the respondents cite regulatory compliance as the biggest barrier to growth. The issue of regulation is more acute for smaller asset managers than for the larger ones.
Competitive pressure and retaining elite talent are other prevalent barriers to growth.
David Beveridge (pictured), senior product marketing manager at SimCorp, says: “Stating that you want to grow by a certain percentage is one thing, figuring out how to best support your growth strategy is another. If these investment firms, in particular the large ones, are to realise their optimistic growth projections, they should take a critical look at their IT infrastructure, ensuring it enables them to operate efficiently, scale their business, and make informed investment decisions.”
Steve Young, managing director, Citisoft EMEA, says: “A key conclusion from the qualitative part of this survey is that no matter which growth strategy an investment manager pursues, a consolidated and modern IT platform is essential. Whether growth is to be achieved through superior client service or product innovation, it is dependent on the ability to present timely, accurate investment data across the organisation and to bring new products swiftly to market. Both require tight system integration front-to-back.”
