Cybercrime presents the biggest disruptive threat to the asset management industry over the next five years, according to a survey conducted by Linedata in Q4 2015.
Over a third (36 per cent) of respondents were concerned about the threat from cyber criminals, undoubtedly buoyed by the large number of recent high profile cyber attacks.
Regulation continues to be their most serious ongoing concern, with 58 per cent of respondents citing the adaptation to new regulatory regimes as the top challenge facing their firm. This was closely followed by cutting costs and maintaining operational efficiencies, which is now the main challenge for 43 per cent of respondents, increasing from 32 per cent in 2013. In contrast, there has been a declining emphasis on maintaining investment performance, falling by 23 per cent over the last three years.
The focus on staff retention has grown consistently, from just 7 per cent of respondents citing it as a key challenge in 2013 to 16 per cent today. This trend shows no sign of abating, with 22 per cent of respondents also predicting that it will continue to be a major priority over the next three years. Rapidly growing markets, such as the Asia-Pacific region, are particularly motivated in this regard (29 per cent of respondents identified it as a major challenge).
Michael de Verteuil (pictured), Head of Business Development at Linedata, says: “While the key challenges of managing regulatory change and maintaining operational efficiencies remain at the fore, the threat from cyber criminals has been added to asset managers’ growing list of concerns. The increasing importance placed on hiring the best and the brightest is also on the agenda of prominent challenges: as the financial system flourishes, the ‘war for talent’ has begun in earnest”.
Just 8 per cent of respondents see blockchain as having the greatest potential for disruption and risk to the asset management industry over the next five years. This reflects the uncertainty surrounding this technology and its potential applications.
Client service is seen as the key way in which players in the asset management space distinguish themselves from the competition, with performance and product offering also important factors.
The rise of passive investing is reflected in the survey, with 35 per cent of respondents identifying ETFs as the strongest candidate for growth over the next 12 months. Derivatives/derivative overlays were also a popular choice (32 per cent), and the overall spread of new in-demand products reflects the trend of broadening portfolios.
De Verteuil says: “The judicious use of technology, in addition to adoption of best practice, is vital for firms wishing to differentiate themselves and add value to their offering in today’s marketplace. In the hunt for greater efficiencies, technology can reduce costs and improve margins while offering both clients and businesses a faster, more comprehensive and intuitive experience. Meanwhile, new technology is driving change in the sector, both in terms of the products it can support and the way it can support them.”
“The 2016 Asset Management Survey gives an overview of a growing, developing sector. Alongside the enduring impact of regulatory regimes, there is a growing emphasis on hiring and retaining talent while achieving the neccesities of continuous investment and prudent business management. At Linedata, we strive to deliver innovative yet cost effective solutions and services that help our clients achieve their aims and succeed in this competitive environment.”