3 strategic considerations for asset managers

Large-scale transformations with a focus on scaling internal capabilities

To stay competitive, asset managers are looking to enhance their value proposition for their investors by providing them access to more asset classes, more geographies and with varying degrees of liquidity, risk, duration, and return. Organic expansion is part of this strategy, though inorganic growth is significantly increasing as “nearly three-quarters (73%) of asset managers are considering a strategic consolidation with another asset manager” per PwC’s 2023 Global Asset and Wealth Management Survey.

Consequently, a growing number of our institutional asset manager clients are taking significant steps in transforming their approach to attract, deploy, and manage capital more efficiently and effectively. These changes range from lighter touch ‘renovations’ to deeper ‘gut jobs’, depending on where the manager is on their own evolution and the nature of their target state.

These demand-driven trends can be consolidated into three major categories, with underlying sub-trends:

1.    Organic and inorganic expansion, to build a larger product set and access new pools of capital:

·         New structures such as European Long-Term Investment Funds (“ELTIF”), Long-Term Asset Funds (“LTAF”), evergreen, open-end structures for private assets to attract a wider base of investors (e.g. retail, aggregator platforms, pension, wealth managers).

·         New strategies both within asset class (e.g. traditional real estate adding real estate debt), and cross-asset class (e.g., traditional private equity buy-out adding private credit).

·         New jurisdictions for enhanced access to investment opportunities and investor capital (e.g., distributing to European investors, setting up in Dubai International Finance Centre (“DIFC”), Abu Dhabi Global Market (“ADGM”), Saudi Arabia, or Gujarat International Finance Tec-City (GIFT City) in India – either through acquisition or organic growth).

2.    Cost and scale initiatives, to enable efficient growth:

·         Digitalisation of data workflows including investor on-boarding and AML, fund, share class, or asset tokenisation, asset valuations process, and bank account opening, with a view to create operational efficiencies and improving the end-user experience.

·         Scaling internal capabilities, by

1. 1. outsourcing ‘in-house’ functions
   2. consolidating multiple outsourced relationships to a select few
   3. adopting co-sourcing engagements
   4. lifting out teams or functions to core long-term partners

·         Data management, including the adoption of internal ‘data lakes’ to ingest middle and back-office information across portfolios, strategies, and structures.

3.    Sustainability initiatives, to continually keep pace with regulatory and investor requirements:

·         Complying with reporting requirements to align with relevant international standards and regulations and meet investor demands, e.g., Corporate Sustainability Reporting Directive (“CSRD”) and Sustainable Finance Disclosures Regulation (“SFDR”).

·         Capturing reliable data and industry-specific metrics aligned to best practices while driving positive change.

·         Benchmarking environment, social, and governance (“ESG”) metrics and value creation over time against peers, sectors, geographies, to demonstrate ‘Impact Alpha’.

The landscape of asset management is undergoing significant shifts driven by evolving investor demands, regulatory changes, and market dynamics. While the outlook remains positive with anticipated growth in investor allocations, challenges such as diversification of investment opportunities, regulatory complexities, and economic uncertainties loom large. To navigate these challenges and stay competitive, asset managers are embracing large-scale transformations, focusing on scaling internal capabilities, and enhancing sustainability initiatives. By leveraging organic and inorganic expansion strategies, improving costs, and embracing digitalisation, asset managers aim to enhance their value proposition and effectively manage capital. As the industry evolves, adaptability and strategic innovation will be key in ensuring long-term success in the dynamic asset management landscape.

4managers aim to enhance their value proposition and effectively manage capital. As the industry evolves, adaptability and strategic innovation will be key in ensuring long-term success in the dynamic asset management landscape.

The Total Economic Impact™ (“TEI”) study

In the comprehensive Total Economic Impact™ (“TEI”) study commissioned by Apex Group, Forrester Consulting examined the potential return on investment (“ROI”) enterprises may achieve by leveraging permutations and combinations of the above. The study revealed that, on average, over a three-year period, companies benefitted by an aggregate US $5.39m cost save, i.e., Net Present Value (“NPV”) of US$2.75m, with an ROI of 105%. The savings arose from four core areas – (1) 73% of the savings came from saved investment in internal staff, (2) 16% from saved technology costs and, the balancing 12% split equally between (3) recaptured productivity for internal finance and operations costs, and (4) cost savings in setting up foreign entities and ESG ratings.

How can we help?

Our single-source solution enables us to deliver an extensive range of services across the full value chain, to asset managers, capital markets, corporates and family offices. We have continually improved and evolved our capabilities to offer the broadest range of services in the industry; including capital raising and advisory services, fund services, Super ManCo services, digital banking, depositary, custody, corporate services, and a pioneering ESG Ratings and Advisory solution.