Nearly half of institutional investors (48 per cent) see emerging technology as a top enabler of growth over the next five years, according to a new study carried out by State Street.
This represents a significant increase from the 2017 study when just 18 per cent of respondents thought that emerging technology, including blockchain and artificial intelligence, would be a top enabler of growth.
New Routes to Growth, which surveyed more than 500 global asset managers, asset owners and insurance companies to understand the challenges they face in achieving their growth objectives, is the second annual Growth study led by State Street.
The survey shows that more than two-thirds (68 per cent) of institutional investors are concerned about their ability to hit their growth objectives within the current market environment. Seventy two per cent of asset owners expect to adopt a more defensive investment strategy going forward and the same percentage of asset managers will slow their plans for expansion over the next five years.
The global survey also found that institutions want to improve their ability to extract better insights from data, with 58 per cent of respondents naming this as a key focus area. Strengthening risk analytics was cited by 43 per cent of respondents as a top outcome that their technology must deliver over the next year.
“As this survey further demonstrates, the investment industry is in the midst of unprecedented change,” says Liz Nolan, State Street’s chief executive officer for EMEA. “Our clients face increasing complexity and regulatory expectations, as well as the need to upgrade technology and improve their data management; all the while carefully managing costs. Our front-to-back platform is being designed to meet these needs and will provide our clients with an efficient, rationalised system, enhanced investment and risk management and, crucially, the ability to extract meaningful and actionable insights from data.”
There is a note of caution among respondents however, as just over two-thirds (61 per cent) indicated they would take an incremental approach to embracing emerging technologies versus re-engineering their entire IT ecosystems. Furthermore, many firms are selectively seeking tech partners as a way to gain scale given the cost involved with an architectural overhaul.
In the UK, integrating new technologies into existing infrastructure and processes is reported to be the biggest challenge around implementation (62 per cent versus 45 per cent in the rest of Europe). As a result, an increase in acquisitions and partnerships could have the potential to reshape the investment management industry, with more than half (53 per cent) of respondents looking at established technology companies to support the development of emerging technology solutions.