A new State Street Vision report featuring independent research carried out in conjunction with the Economist Intelligence Unit, points to the emergence of a new paradigm in Europe in which asset managers must adapt to the radically changing needs of investors in the wake of the financial crisis.
This Vision paper, “The Changing Shape of European Investment Management – Volume 3: Navigating Complexity,” also explores other key factors that are shaping Europe’s asset management industry including changing investor needs, widespread regulatory reform and urgent demographic trends.
In this comprehensive study which surveyed more than 160 European asset managers, the most important factors driving investment decisions are yields (28 per cent), risk aversion (27 per cent), diversification away from mainstream asset classes (22 per cent) and regulatory complexity/uncertainty (22 per cent). Asset managers are cautious about increasing assets under management, with less than a third expecting to increase AUMs by more than eight per cent over the next two years.
Joe Antonellis (pictured), vice chairman of State Street and head of its Global Services and Global Markets business for Europe, Middle East, Africa and Asia Pacific, says: “Asset managers are seeking strategies to navigate the new environment and their quest for fresh ideas is driving a significant shift in approach. They are forging new relationships with investors and service providers and the benefits will go to those firms that can deliver innovative outcome-based solutions or genuine alpha. Those managers that cannot will struggle.”
Providing a high level of detailed and quality information to clients is the greatest data management challenge facing asset managers, according to 49 per cent of respondents. Achieving sufficient scale with in-house systems was the second most cited challenge (44 per cent) and providing accurate data to regulators and auditors in a timely fashion was third (33 per cent). Nearly three in 10 asset managers (27 per cent) say internal policies and procedures pose the greatest challenge when trying to quickly bring new products to market, with finding consensus among senior managers cited by 19 per cent.
The State Street Vision report explores the structural changes occurring across the investment value chain as challenging times drive asset managers to redefine their roles and the roles of service providers in an evolving market environment.