With the climate crisis, AI, controversy over ESG and a host of other factors shaping investor behaviours and attitudes, as well as how business is conducted in the asset management industry, the future of our field appears more unpredictable than ever. However, here are a few trends that we believe are likely to play a key role in years to come:
ESG (and specifically decarbonisation)
- The global push towards decarbonisation is expected to accelerate in the coming years, driven by increasingly dire climate forecasts and the ongoing destruction of ecosystems.
- This trend is likely to have a significant impact on the energy industry, as companies seek to transition to low-carbon energy sources and reduce their carbon footprints.
- Asset managers able to identify and invest in companies that are well-positioned to navigate this transition are likely to see significant growth opportunities.
- As demographics shift and investors and financial services firms become more diverse, social and governance factors are also likely to grow in prominence.
- The digitalisation of key industries – the energy industry, for example – is expected to continue, with companies increasingly relying on data analytics, automation and other digital technologies to improve efficiency and reduce costs.
- This presents opportunities for investors, as this transition can create structural advantages for businesses that are placing digitalisation at the forefront of their agenda.
Shifting investor preferences
- Investor preferences are expected to continue to evolve, with increasing focus on impact investing and social responsibility shaping our industry.
- Additionally, there is growing investor demand for transparency and accountability in the asset management industry, and companies that are able to provide clear and concise reporting on their ESG policies and practices are likely to gain a competitive advantage.
The ‘haves and have-nots’
The asset management industry is facing a growing divide between large established firms that enjoy strong brand recognition and extensive resources, and smaller firms or new entrants that lack these advantages. Smaller firms may lack the in-house expertise or resources to create a broad range of financial products or effectively market themselves, creating a significant advantage for established players.
Smaller firms therefore need to find creative ways to differentiate their brands and business offerings from those of their larger competitors. This may involve identifying niche investment opportunities or focusing on areas where they have a particular competitive advantage.
Additionally, intensifying investor demand for transparency offers businesses the opportunity to distinguish themselves through excelling in this area, regardless of their size or name recognition.
The asset management industry exists in a constant state of flux, with new trends, economic cycles and geopolitical events driving changes in investor behavior and preferences. Asset managers that are able to anticipate and adapt to these shifts are well-placed to outperform their peers. Key shifts in recent years include:
- The growth of digital platforms and robo-advisors, which offer investors low-cost, automated investment services. This trend has put pressure on traditional asset managers to find ways to remain relevant and compete with these new entrants.
- The increasing demand for customized investment solutions, with the wide range of products and strategies on the market enabling investors to find business offerings that align more closely with their needs. Companies that are able to cater to specific, granular investor preferences may enjoy a greater competitive advantage in future.
- Geopolitical and macroeconomic events, which can have a significant impact on asset prices and investment opportunities. Destablising trends in recent years (for example, rampant inflation through 2022 and 2023) have caused disruption. Asset managers that are able to assess and manage these risks effectively are likely to deliver better investment outcomes for their clients.
- Finally, changing regulatory requirements and evolving standards of conduct are also driving changes in the asset management industry. Asset managers that are able to navigate these regulatory requirements and maintain high standards of transparency and accountability are likely to build trust with their clients and differentiate themselves from their competitors.