Trends We’re Watching In Investment Management in 2019
The investment management industry continues to evolve at a rapid pace. Competition is fierce, but so are the opportunities.
The need to tackle ongoing regulatory pressure, coupled with demands for more investor-level transparency, set the tone for much of last year. At the same time, we saw a return of volatility, which created opportunities for many active managers, and the continued expansion in the passively-managed segment of the market. The year saw many new innovative products come to market, as investment managers of all shapes, sizes and asset classes strove to stand out. We also saw many firms across the landscape adopting next-generation technologies, such as AI, to help optimize their operations.
So, what’s next? To understand the direction of the investment management technology landscape, we look to what’s driving our clients in the alternative and traditional asset management sectors. Here are key investment management trends we’re watching in 2019:
Growth & Diversification
Competition continues to present challenges to investment managers in the traditional and alternative markets alike. At the same time, capital is flowing in. In the first half of last year, 16 of the top 20 funds by net flows pulled in USD143 billion. Additionally, 2018 saw some of the biggest hedge fund launches, indicating an appetite among investors for great performance. With the return of volatility, there may be more opportunities to capture alpha, so we anticipate more launches coming down the pike.
We also anticipate investment management firms across the alternatives and traditional, long-only sectors to continue to diversify their strategies. We expect to see more branch-outs into ETFs, UCITs, smart beta, risk parity, factors and other strategies. We also believe asset class diversification will continue.
To succeed in these areas, investment managers will need to rely on effective, multi-asset, adaptable platforms that will grow along with their business.
Regulation & Transparency
Last year kicked off with the implementation of MiFID II, a comprehensive set of legislation aimed at increasing transparency. To this day, some aspects of the legislation are still being worked out, and even firms outside of MiFID II jurisdiction are adopting some transparency directives. Then followed GDPR requirements, and a greater focus by the Securities and Exchange Commission on liquidity risk management. And with a review of AIMFD already underway, the regulatory scrutiny shows no signs of slowing down in 2019.
Investors are responding to these changes. We see many inquiries from our clients, whose investors are asking more questions about their operational efficiency, data privacy, cybersecurity, risk management and compliance, use of models and other key concerns. There is an increasing need for transparency, and a need to have the information validated, available and constantly updated. This is an opportunity for investment managers to stand out from their peers, and we believe strong, efficient technology is key to making that happen.
All of these trends are bound to increase the already rapid pace of technological innovation. We see it in customer experience improvements many wealth managers have adopted. We see it in rapidly expanding trading automation across asset classes. Machine learning and AI are fast becoming the focus for many firms across the market.
We are also seeing a greater focus on operational efficiency as managers realize its value. A recent survey found that many asset managers are coming to accept that operational efficiency is key to helping increase alpha and reducing operational drag, thereby improving profits. This is the core premise of our business – to power investment managers to achieve investment and operational alpha most efficiently and profitably.
We believe 2019 will be the year that more managers will take the opportunity to reevaluate their systems and seek to optimize their front-to-back-office processes. Technology is evolving fast to deliver better execution, transparency and diversification support, and many investment managers are starting to implement these tools to stay ahead.
What is SS&C Eze Doing About It?
SS&C Eze will play a key role in this next stage in the evolution of the financial ecosystem. Last year, we joined SS&C Technologies in the quest to empower investment managers with the most effective, efficient and easy to use tools across their enterprise. To take on the challenges today’s markets represent, investment managers need to be in the best position to focus on performance and innovation while leaving operations management to technology. Smart, efficient, and streamlined solutions, supported by world-class service, are a necessary part of that zeitgeist. We believe being part of SS&C puts us in the best position to deliver innovative, collaborative and effective solutions to our clients—so they can truly achieve operational excellence without having to hunt for tools across multiple providers. Stay tuned!
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Jeff serves as senior vice president and general manager of SS&C Eze and has been with the company since 1999. During his tenure he has held a number of leadership and executive positions, including chief operating officer from 2005 to 2012, and prior to that he was chief technology officer. Jeff also served as executive managing director on the executive committee for former parent company ConvergEx Group from 2006 until the formation of Eze Software in 2013.