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AdminAug, 30 20234 min read

4 Ways Investment Management Firms Can Stay Competitive in Perplexing Markets

At the start of 2023, a survey by The Conference Board revealed that over ninety percent of CEOs in the U.S. believed the economy would soon fall into recession.    

But here we are, well into the third quarter, and the economy keeps plugging along: inflation has begun to moderate, the labor market and consumer spending remain relatively strong, and the mid-year earnings season was better than expected.   

This positive news has investors wondering: what lies ahead for the remainder of the year? Will there indeed be a recession? Or will this good news economy keep going?   

In these unexpected times, no one knows for sure.  

Successful asset managers are not waiting to find out. Instead, they are taking proactive steps to protect their alpha: expanding asset classes, growing their investment ecosystem, and learning to do more with fewer resources.   

Here are 4 things we’re seeing asset managers do to position themselves favorably for what lies ahead.

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Asset Class Diversification Helps Manage Shocks & Volatility  

Firms looking to safeguard their portfolios by lessening the potential impact of shocks in any one asset class are diversifying. Doing so also opens the possibility of gaining valuable basis points of performance, the ability to customize portfolios to match client goals, and the potential to retain their competitive advantage.   

However, firms making these moves quickly realize that slow, inefficient processes that are often introduced alongside new asset classes can cause them to miss out on the associated advantages.  

For example, firms turn to fixed income to smooth out the volatility that comes with higher interest rates and elevated uncertainty. As Goldman Sachs reports, "2023 will be a pivotal year for raising allocations to core fixed income assets.”  

As they add these fixed income assets to their portfolios, investment firms seek a more efficient way to trade them. The good news is that the expansion of electronic trading of fixed income assets is opening access to a wide variety of fixed income liquidity options.   

To access the value of this electronification, investment firms need an integrated solution that offers the same general experience across asset classes – while still providing the functionality required to trade specific ones. 

Investment Firms Reconsider Technology Delivery 

In times of uncertainty, some asset managers focus on how to free up and make the most of their existing resources. 

For many firms, that means assessing whether to move their investment technology to the cloud or to keep with their on-premises solutions.   

Despite the potential benefits of moving to a cloud-delivered solution, like the elimination of space required for server rooms and a decrease in the resources needed to upgrade and maintain systems, it only makes financial and operational sense if it meets the firm’s specific needs and comes with a dependable, experienced partner to assist with the process. 

If you think the cloud is the right choice for your firm, determine if your vendor has experience offering and supporting cloud-based systems. Can they act as a guide in your transition, and do you trust them to be a partner to your firm throughout the lifetime of the deployment?  

APIs Support New Opportunities & Simple Expansion of Firms’ Investment Ecosystems 

Firms are also turning to technology to streamline operations and open up opportunities.  

Instead of making significant investments in complex systems, these firms use APIs to leverage their existing technology investment to create new opportunities for alpha and to scale faster 

APIs power the seamless exchange of information between a vendor's suite of applications and other trusted applications. Although APIs have existed for years, the technology has matured to a point where solutions can communicate seamlessly, despite differences in technical architectures.  

With this type of open architecture, asset managers can add features to enhance their performance on the fly without making huge upgrades. In addition, firms can use APIs to make incremental changes, minimizing the disruption those upgrades could cause. 

By working with the right investment ecosystem provider, users can access flexible APIs that connect with virtually any external application at a lower cost than engaging with each vendor individually.  

Outsourcing Offers a Host of Operational Benefits 

To reduce overhead and improve their chance of achieving operational alpha, firms are also looking to outsourced and co-sourced services. 

Managed services, for example, can act as an extension of firms’ investment operations. Offloading essential but routine daily and monthly processes to managed services allows firms to free up valuable time, focus on higher-value work, and remove key-person risk.   

Strategic services provide firms with operational and industry experts that can help them navigate new business or operational challenges, bridge short-term resource constraints, or optimize platform experiences.  

But shifting to outsourced solutions will only pay off if firms’ technology vendors can provide the service and support investment firms need to operate at peak performance 

Investment Technology and Services for What Lies Ahead 

For over 25 years, SS&C Eze solutions have helped 1,900+ global asset managers transform their investment processes, optimize operational and investment alpha, and grow their businesses.   

Today, with over $80m invested annually in R&D across SS&C wealth and investment technology offerings, the company continues to develop technical innovations that meet the evolving needs of investment firms – regardless of where that technology is hosted. 

And our efforts don’t stop at software. Our client-first approach extends to every touch point, and with over 500 service experts worldwide, clients can always speak to someone who knows them, their business, and their workflows.