Adapting to the developments in the investment and securities industry is a must, if an asset management company is to survive. And in the past half-decade, keeping up with the changes has been pushing many fund managers to hire asset servicing firms.
Below are the industry trends that are facilitating this phenomenon:
Alternative investments on the rise. Amid the unpredictability of today’s investment climate, more client-investors are looking beyond the traditional options and exploring alternative products such as hedge funds. Industry pundits even predict that soon, we may not have to use ther term “alternative” any longer. Moreover, passive investments such as retirement plans that generally come with less opportunity for massive returns are also drawing attention, especially among those who have a lower risk appetite and prefer to pay lower fund management fees.
Transparency takes the spotlight. Across the country and the globe, a host of new regulations are emerging, while the implementation of the past policies are being strengthened. Regulatory bodies in the industry and in the government have deployed more forces as well as more advanced technologies and procedures to monitor noncompliance. These protocols especially highlight the importance of accountability and transparency, and observing these have since become top priority for many asset managers. In the face of this development, firms are required to undertake massive improvements in the way they handle their fund management processes and overall corporate governance.
Growing investor base. New client investors will be pouring in more capital to the industry. In fact, according to PricewaterhouseCoopers, the total amount of assets under management is expected to rise to $102 trillion – a truly sharp growth from being a $64 trillion-industry in 2012. Paving the way to this development is the rise of more mass affluent investors and high net worth individuals in North America, as well as the emergence of new markets in the growing economies of Asia, Africa, the Middle East, and South America. This development means an even more competitive industry, with fund managers fighting for their share of the pie, and also struggling to develop and manage new product offerings to their potential client-investors.
The support of asset servicing firms comes in handy in this context, as they offer the needed technology, platform, and manpower – the entire infrastructure – to take on the middle and back-office operations, from accounting, to tax reporting, to compliance management. This way, the portfolio managers can focus on such core functions as client relations and making strategic investment decisions.
