One in four (25 percent) senior asset management executives believe it’s “highly likely” they will face direct competition from a non-traditional new entrant such as a technology or non-financial services company within the next five years, according to a report from State Street Corporation (NYSE: STT). A further 54 percent believe this threat is “somewhat likely.”
Despite the emergence of new entrants, State Street’s findings reveal asset managers are in a positive mood. As the assets under management continue to increase, many asset managers are making big plans to catch the next wave of growth. Over the next three years, some 42 percent of survey respondents are preparing to enter a new product category for the first time, 52 percent plan to expand distribution networks and 48 percent will tap new distribution channels. In addition, the research also shows that acquisitions are set to reshape the fund management industry – 46 percent of those surveyed said they are evaluating acquisition opportunities today.
Jane Mancini, senior vice president and head of asset manager sector solutions at State Street said, “Our findings show that a number of asset managers are overhauling their approach to respond to changing investor needs and new competition– from offering new investment solutions to making strategic acquisitions to become more competitive and grow their businesses.”
“As new entrants eye the sector, success will increasingly depend on technology and data analytics to address the growing demands of clients for more personalized and sophisticated information and investment solutions,” continued Mancini.
Overall, State Street’s report looked at what fund managers see as the biggest risks and opportunities facing them today. The report shows that they must adapt to new client needs, which means they need to focus more on multi-asset strategies, providing greater transparency and delivering a more personalized approach. They also feel under further pressure to reduce costs.
Investor needs are changing with a bigger focus on risk
- 70% of asset managers interviewed said they are having to rethink their business strategy around demand for multi-asset strategies
- 64% say that heightened risk and compliance demands threaten to divert resources from the critical business areas
- 96% of asset managers say they are under pressure to reduce costs
- 77% say they now offer clients more transparency on risk and return compared to a year ago
- 61% say clients are demanding a more personalized approach to help them understand their risks compared to a year ago
- 72% of asset managers say their conversations with clients has evolved to focus more heavily on risk compared to a year ago
Mancini continued, “Asset managers are focusing on improving their client and competitive proposition; forging closer partnerships with investors; providing clients with the integrated yet highly granular view of portfolio risk they need and developing innovative models that will see off the threat from new market entrants. They also need to invest in their operating infrastructure to allow them to be more transparent, insightful and cost efficient for investors.”
The report is based on a State Street survey of 400 senior executives in the asset management industry. The State Street 2015 Asset Manager Survey was conducted by FT Remark in April and May 2015. Respondents from 23 countries participated, with the majority from Australia, Canada, China, Germany, Japan, Switzerland, the UK and US. Respondents manage assets for both institutional and retail clients, spanning traditional and alternative strategies.
The full report can be viewed here.