The results of Linedata’s ninth Global Asset Management Survey reveal a desire among asset managers to capitalise on quick wins from data analytics and digitialisation to protect investment and operational performance against the potential for further market dislocation.
After the implementation of MiFID II and GDPR, asset managers were looking forward to a period of relative calm where they could focus on longer-term innovation projects, including digital transformation technologies. Concerns of a continued market downturn are now forcing them to change direction and firms are reacting to the potential for more disruption. This survey underscores how navigating this paradigm is a new normal for asset managers worldwide.
“Asset managers were struck by a tumultuous end to last year that has led them to rapidly refocus on the critical initiatives that can boost operational efficiencies and alpha generation in 2019. In this environment, doing more with one of their greatest untapped assets – their data – is essential,” says Gary Brackenridge (pictured), Global Head of R&D and North America Asset Management at Linedata. “We expect to see more developments in this area as well as a rise in outsourcing, which can not only facilitate advanced data analysis, but enable managers to focus on delivering investment performance and exceptional client service to retain and attract assets.”
According to the survey, maintaining investment performance is the biggest business challenge (34 per cent): the concerns are a stark contrast to last year, when the top challenge was adapting to new regulation (44 per cent) and maintaining investment performance ranked fourth. This year, attracting new client assets (33 per cent) and sustaining operational efficiency (33 per cent) come second and third.
Trading and other front office technology and data management are top areas of IT spending: doing more with data is seen as particularly important to investment performance and nearly a quarter of asset managers (23 per cent) believe improvements to investment strategy decision making is the biggest data analytics opportunity.
Hype around robo-advisers and blockchain dies down: 7 per cent of respondents see robo-advisers as the biggest disruptor to the asset management industry over the next five years, down from 22 per cent in 2018. 12 per cent see blockchain as the biggest disruptor, falling from 16 per cent in 2018.
Asset managers prioritise data and nearer-term digitialisation projects: longer-term structural transformations are a lower priority over quicker wins with data and automation. This is supported by the significant progress managers have made with cloud adoption over the past two years; adoption for non-core systems, such as email, has grown from 29 per cent in 2017 to 49 per cent in 2019 and CRM systems from 22 per cent to 38 per cent over the same period.
Passive is dominant, but many firms are not able to benefit: ETFs are the products managers most expect to see growth in this year (cited by 36 per cent of managers). However, only 9 per cent plan to launch mainly passive products, versus 41 per cent who plan to launch mainly active funds. This suggests that the dominance of ETF market leaders continues and managers should focus on what they see as their top differentiating factor – their reputation and client trust (24 per cent) – to stand out.
