Global asset management’s top brass congregated in Berlin this week for the industry’s own version of Davos to debate and discuss the trajectory of this under-pressure sector.
Geopolitics – hard to ignore – was at the fore but a key question permeating the Fund Forum International event was how the industry can carve a future path that doesn’t cause industry implosion while improving the outcomes of savers and investors globally in an environment where the onus for long-term saving increasingly rests with individuals.
Greater transparency across the industry has seen a shift of power from manufacturer to distributor to intermediary… for some this power has bounced back from intermediary to the distributor (depending on the business model advisors operate under).
The situation is compounded for asset managers and also to some extent wealth managers because of the inevitable commoditisation within a mature market. More often these days it’s the role of marketing and strategy teams to maintain ‘life support’ by manufacturing differentiation between firms, at least for those with tepid legacy propositions.
Part of the narrative in a mature and busy market is therefore about relevance.
For the first time in years active bond and equities are both working as a strategy, and providing some respite for managers hoping to show anyone who will listen that they can add value. But for many firms this is only a momentary pause for breath along the conveyer belt of destiny to homogeneity.
Naturally, liquid large cap is the most futile place for managers to be seeking differentiation and arbitrage opportunities, although factor tilts or systematic investments within large cap still allow for some scope to outperform.
Nonetheless, multi-asset and outcome investing seem to be where groups are seeking to differentiate and are hunting alpha in 2017. In essence, if a strategy can be easily indexed or replicated via a beta tool then it’s not really going to work long-term as an example or where active managers can remain relevant.
From the managers we spoke to in Berlin, competition is certainly keeping firms on their toes and perpetually focussed on investment innovation.
Tomorrow’s successes will be managers that identify their acute areas of expertise and dare we say it… their value-add, and have the ability to execute their strategic plan with surgical precision.
Embracing technology and working backwards from the customer to manufacturer is the consensus (albeit obvious) view of the route to pursue.
Blackrock CEO Larry Fink has already declared his desire for the world’s largest asset manager to become a tech company, reinforcing this embracing of technology.
So the question is: will technology help those managers seeking to demonstrate their skills or is technology only a friend to those looking for large indexation and beta economies of scale? Or can it also underpin managers digging into some of the nooks and crannies of investment opportunity and that require more nimble approaches and more subjective assessments?