With the economy and the market showing ongoing signs of improvement, business optimism among investment managers is extremely high according to a poll by SEI (NASDAQ: SEIC).
The poll, conducted at a recent event for the company’s investment manager clients, shows that a majority of participants (78 per cent) are optimistic about their firms’ business prospects over the next three years, while nearly all of those polled (86 per cent) believe investor confidence levels are higher today than in the aftermath of the financial crisis. There are a number of reasons behind the optimism, but brand strength (32 per cent, up from 19 per cent the year earlier) was cited most frequently, followed by positive market prospects for their strategies (24 per cent), and strength of their distribution strategies and resources (21 per cent). For the minority of managers expressing concern about their prospects, weak distribution strategies and resources was the most commonly cited reason.
The poll showed managers are backing up their optimism by investing in their businesses. The top three selections were identical to the results of last year’s poll, although the top-ranked area for investment in the next 18 months, marketing and distribution, was pointed to by nearly half (45 per cent) of those polled, up from 34 per cent in 2011.
Other areas identified for investment included back-office operations and technology (23 per cent), and portfolio management (10 per cent). Business opportunities in alternative investing and in the institutional channel were pointed to as the greatest opportunities for growth. Specifically, more than eight of 10 managers polled (83 per cent) believe that firms managing active alternative strategies have the best prospects for asset growth over the next three years, while only 15 per cent of respondents named firms managing active long-only strategies. When it comes to client segments and distribution channels, more than two-thirds of respondents (69 per cent) said institutional channels present the greatest opportunity for asset growth over the next 12-18 months, followed by new assets from retail channels (17 per cent) and high-net-worth channels (8 per cent). Only a small percentage thought the greatest opportunities lie in organic sources of growth such as market appreciation.
“Managers continue to invest in their operational infrastructures and achieving operational efficiencies to support their firms remains a key focus. With a robust and scalable operational platform supporting them, managers have been focusing more and more on providing high-touch client service and delivering improved transparency and insight to their increasingly institutional prospect and investor base.” “While the markets remain somewhat volatile, managers are seeing investor confidence grow, which gives them greater business optimism and that leads to more business investment,” says Ross Ellis (pictured), Managing Director, Knowledge Partnership for SEI’s
While there is broad optimism, more than a third of participants (36 per cent) see economic uncertainty as the most significant challenge the industry faces over the next 12-18 months, followed by geopolitical uncertainty (30 per cent), and regulatory requirements (22 per cent).
Many of those polled suggest that their firms still have work to do in educating employees about their core brand message. Respondents were split on whether all key employees could clearly and consistently convey the uniqueness of their firms’ value propositions, with 53 per cent answering in the negative and 46 per cent saying “yes.” Those polled say they clearly believe brand reputation plays a role in their ability to win mandates, with 39 per cent saying it plays a large role and 33 per cent a moderate role; another 20 per cent say it plays a small role.
The poll was completed by C-level and senior executives across management operations, distribution, and investment professions.