In BCG’s 18th annual report on the global asset management industry, there was a focus on several areas, including:
Evolution of Alternatives
Broadly defined, alternatives are one of the strongest, fastest growing asset classes and arguably the most profitable. According to the BCG report, while alternatives make up only 16% of global AUM, they account for nearly half of revenues and are expected to continue on their growth trajectory as investors seek nontraditional return sources. However, as the report states “not all alternatives are created equal.” Private investments, including private equity, real estate, infrastructure, and private debt, have grown rapidly as a percentage of overall alternatives and now represent about 60% of alternative revenues. More “traditional” alternatives, such as hedge funds, whose performance has suffered for a substantial period of time, have decreased in popularity. During these challenging times, with competition intensifying, technology, expertise and scale will provide the means for firms to succeed and dominate.
Enhanced Client Experience
Given the pressure of competition, a superior client experience can provide an opportunity to stand out from the pack and help to move the conversation beyond mere performance. Data and technology are helping firms achieve best practices and provide an opportunity to build a comprehensive view of the clients and their needs. The integration of CRM, client communications and sales efforts are enabling personalized and proactive client experiences, allowing firms to focus on areas that are of growing client interest, such as responsible investing, and to structure compensation to incent behavior that benefits the client, while still retaining a business mindset. The report identifies five best practices that are driving an enhanced client experience:
• Leading with Data-Driven Business Intelligence
• Building Robust Data and Technology Organizations
• Realigning Sales and Marketing
• Upgrading the Product Development Cycle
• Strengthening Culture and Incentives
Advisor to Insurance Companies
Insurers represent a major investor segment and a significant portion, 80%, of global institutional asset management business annually, with more than $40 trillion in AUM. The current environment is putting pressure on insurers. This provides an opportunity for asset management firms to provide more robust advice and guidance to this segment of clients. This includes looking at short- and medium-term needs, and incorporating risk management and an assessment of potential scenarios in the future in terms of liquidity needs, fee structures and other factors. The goal is to help insurers meet their own risk/return goals, while also fulfilling policyholder return expectations.