Research from global investment technology firm Milestone Group, conducted in collaboration with ValueExchange, and other sponsors, uncovers widespread transformation across the global fund management industry.
The report, Asset Owner Transformation, reveals a fundamental shift in the way Asset owners will be structured and run over the next three years. Transformation is wide-ranging, but projects are now most commonly focused on enterprise data, with 86% of projects aiming to source new data and 75% aiming to centralise data, as well as system architecture, with 82% introducing system automation and 65% deploying cloud technology. Positively, 62% of enterprise-wide projects (up 163% compared with the period 2019-2021) are showing that firms are moving towards a more holistic infrastructure.
In terms of objectives of projects, asset owners globally are most commonly looking to improve operational agility, followed by optimising risk management and reducing costs. Regulatory compliance, on the other hand, varies across the different regions, with it being a top item driving change for Africa and Asia Pacific and the least direct driver in North America despite new regulations.
These projects are moving funds away from the widespread dependence on legacy technology and spreadsheets, which 45% of asset owners still use for asset allocation activities despite being increasingly complex for purpose in today’s changing investment landscape, with increasing exposure to new and more complex asset classes.
For example, the research uncovers that 53% of funds are expanding into new asset classes (a figure which is especially high among larger funds), 20% are consolidating following M&A activity, while 67% are having to react to revised governance and investment standards, such as the growing demand for ESG reporting. On that basis, ESG is the biggest priority for projects from 2022-24, with 66% of asset owners working on ESG oversight and reporting (more than double that compared with 2019-2021).
However, there are some obstacles to transformation and, although many firms are taking positive steps, securing the investment for transformation can be hard-won internally. The factors which are blocking or limiting progress among asset owners are convincing stakeholders of the business case, at 69% of firms, regulatory timeframes, at 70%, and lack of available systems, at 61%.
Geoff Hodge, President of Milestone Group, says, “Although asset owners appear ready to initiate change, it’s important to note how much work is left to be done. Transformation on this scale is never straightforward but firms must first establish which changes are most strategic for sustainable, long-term benefits. As a priority, asset owners should think about moving off spreadsheets and aim for more sophisticated investment architecture, which ideally should be both enterprise-wide and automated as far as possible. We hope this report shows the widespread transformation happening and encourages asset owners to take action.”
To create this report, ValueExchange facilitated the survey of 130 asset owners (and their service providers) around the world, representing a range of fund types and sizes.
The full survey report can be downloaded here.