What are key themes for asset managers in 2022 and 2023?

Asset managers must pivot their strategies accordingly to reap the rewards of the opportunities the past two years of industry-wide changes have brought.

In a market that has experienced significant disruption as a result of the Covid-19 crisis, these are four core trends that will define the future of asset management, for 2022/23 and beyond.

Transparent ESG reporting with quantifiable metrics

Asset managers can create long-term value by considering a broad range of stakeholders, such as employees, customers, regulators and shareholders, focusing specifically on boosting trust and confidence.

One way experts predict the asset management industry to do so is by confronting greenwashing and instead disclosing their progress on environmental, social, and governance targets with unmanipulated, quantifiable metrics.

Stakeholders ultimately want firms to be genuine about their actions and the progress they’re making. Greenwashing and general dishonesty around additional Environmental, Social and Corporate Governance (ESG) issues for hedge fund managers such as gender pay gaps and diversity has, and will continue to, put firms at risk of losing clients, increased regulatory scrutiny and reduced access to funding.

Companies within the EU are now required by The European Union’s Sustainable Finance Disclosure Regulation (SFDR) to release data on carbon emissions, water usage, energy consumption, biodiversity preservation and other sustainability issues. This, along with any future platforms designed to collect and process industry-wide ESG data that may emerge, will increase transparency, trust and understanding on ESG data and ratings.

From this, data analytics technology can identify patterns and produce valuable insights for stakeholders.

An additional trend within this area is the development of enhanced risk management. With ESG factors increasingly influencing the decisions of the financial sector, asset managers must also consider implementing bespoke risk management solutions designed specifically with ESG criteria in mind for eco-concsious investing.

Mergers, acquisitions and consolidation

Another prominent trend predicted for 2022 is an increase in global M&A activity, especially in investment firms with annual revenues between $5 billion and $10 billion.

At present, the asset and wealth management sector can be described as largely fragmented, with the industry’s top firms controlling only 35% of the market. We can expect this to change as firms explore ways to grow their client bases, offer more diversified products and services, and satisfy evolving investor preferences, as well as creating additional revenue streams.

Mergers, acquisitions and consolidations remain viable solutions as firms manage their costs, capabilities and scale equations, and align with industry predictions for further consolidation amongst smaller and mid-sized investment management firms to enhance capabilities and improve client servicing.

Mass Personalisation

From now onwards, an integral element of asset managers’ success will be their ability to personalise their products and service offerings at scale. According to Accenture’s survey of 250 senior executives at asset management firms across North America, 89% stated that “customization for the masses” is an investment strategy that will define the next five years.

The benefits of doing so are twofold; improving client experiences with greater customer centricity and presenting an attractive alternative to low-cost beta investments as alpha becomes more difficult to achieve.

With investment managers now able to engage with clients via innovative digital channels made possible by technology, firms are expected to continue employing technology to enhance their interactions with clients.

For example, delegating the handling of client inquiries to intelligent chatbots, communicating and building relationships with clients via virtual meetings, and most significantly, providing extra personalised reporting.

Firms can offer a more personalised service by utilizing data analytics to identify the unique interests, content preferences and ideal frequency of interactions, so that clients can receive the insights they need in the manner that resonates with them most.

With investment management being a highly relationship oriented industry, offering greater value for clients through digital advancements could support advisers with closing deals more effectively. Firms that invest in facilitating high value communications and engagements will have the edge in 2022 and 2023.

Democratised wealth management

For too long, the wealth and asset management industry has been inaccessible to certain groups of people. Now, many firms are attempting to open opportunities up to previously underserved consumer groups with the help of robo-advisory services.

Less experienced investors can access detailed, comprehensive advice through an entirely digital interface, with improved transparency on each investment and how their predicted performance.

With fees for robo-advisory services typically around 50% to 75% lower than traditional advisory services, and a reduced minimum investment on transactions, this strategy helps to make the industry much more accessible to a wider range of customers.

Another benefit of this for customers is improved efficiency of investment management. This is down to the majority of robo-advisory offerings being algorithm-based, enabling automated investment solutions that automatically rebalance the customer’s asset allocation without needing their input.

Trusted asset management solutions for 2022 and beyond

Although the past two years have seen unprecedented uncertainty for asset management firms, IG Prime’s prime brokerage solutions have supported hedge fund and family office managers throughout, with cutting edge technology, advanced platforms and synthetic prime and custody services.

As a trusted prime broker, IG Prime is uniquely positioned to create solutions tailored to our clients’ needs, leveraging our relationships with Tier 1 banks to deliver solutions including execution, custody and real-time reporting.