Asset managers prioritise controlling costs amid market mayhem, finds Northern Trust

Investment managers are most concerned about controlling costs in volatile markets, followed closely by a focus on risk and compliance issues and support for expansion into markets beyond their home country, according to a survey of 300 global asset management firms sponsored by Northern Trust.

Northern Trust’s white paper, ‘Driving Growth in Asset Management: Solutions for the Whole Office in 2020 and Beyond’, offers insights into how managers can control costs while increasing their distribution by leveraging technology, outsourcing functions that may not be core to their investment process, and viewing their operations holistically, as a whole office, rather than in silos of front, middle and back office functions. 

“Driving profitable growth beyond 2020 will require more than finding new streams of revenue or reducing costs,” says Ryan Burns, head of Global Fund Services (GFS), North America.  “The most successful asset managers are rethinking their operating models from the perspective of their whole office, seeking holistic changes such as outsourcing that can help them grow their businesses.”

The survey, conducted for Northern Trust by WBR Insights, shows asset managers struggling to balance growth strategies with escalating costs and fee pressures: 87 per cent of respondents said their key strategic priority for the next two years will be controlling costs, but nearly as many (86 per cent) also plan to focus on risk,  compliance and resiliency and 85 per cent said supporting expansion into new markets was a top priority.

Managers are looking at a range of outsourcing options to drive efficient growth and strengthen key processes. For example, 85 per cent of respondents have either already outsourced their trading desk or are interested in doing so in the future. Nearly half (45 per cent) are considering outsourcing data management in the next two years while approximately one-third are considering outsourcing foreign exchange and middle office functions. 

“Asset managers today want true flexibility to choose the best partners for their investment processes,” says Clive Bellows, head of GFS EMEA. “For example, they want to be able to select an order management system, or a foreign exchange provider, or a trading solution that fits the way they work. Decisions that ultimately help drive Alpha today are focussed on optionality and interoperability.”  

The survey also revealed that 64 per cent of respondents plan to achieve their strategic priorities by leveraging new technologies. However, investing in next generation technology such as AI, machine learning and cloud-based data management solutions comes with a cost that can be prohibitive when firms are seeking to control expenses.

“Our clients’ are proactively thinking of how to streamline their operations, and they have turned to outsourced providers like Northern Trust who can help them leverage technology to suit their business goals and objectives,” says Caroline Higgins, head of Global Fund Services, APAC.

“This is about providers who are able to give managers access to digital tools that automate workflows and facilitate self-service whilst providing the intra-day data and analytics they need for informed decision making.”