Financial Services Ireland

Thought Leadership

Global Investment Operations Survey

Read more

The Global Investment Operations Survey documents the views, insights and observations of COOs and heads of investment operations at 40 leading asset managers headquartered in the Americas and Europe with assets under management spanning US$5 billion to more than US$1 trillion, with the majority of respondents managing between US$50 billion and
US$500 billion.

Changes to the asset management operating model are now being driven by the expansion of distribution channels and the development of new products, as managers gear up for growth and position themselves to capture new inflows. Increasingly, managers are even positioning themselves to embark upon a direct-to-consumer distribution strategy, with significant investment in marketing and brand management, according to the findings of our global asset management investment operations survey which involved 40 CEOs and head of operations across the Americas and Europe.

While there is still a large change agenda driven by regulatory compliance and cost management, the biggest drivers of change are the expansion of distribution channels and the development of new products, as asset managers look to build on growth opportunities. Improving distribution channels was named as the primary driver of operating model change for 55% of managers surveyed, followed by enabling new products (45%), changing regulation (42%) and targeting new markets (33%).

US in prime position to steal a march on European managers

The priorities of managers in the US and Europe differed considerably in 2013. When asked to rank the primary drivers of change to their distribution models, 81% of US managers said improving their distribution channels, followed by enabling new products (43%), targeting new markets (33%) and increasing brand awareness (24%). Just 19% cited the changing regulatory landscape. Conversely, in Europe 68% of managers said operating model change is still primarily driven by regulation and while 47% are focused on enabling new products, and just 26% are prioritising improving distribution channels or targeting new markets. Brand awareness is a peripheral concern, with 5% claiming it to be their key driver. This shows that the regulatory landscape in Europe remains highly complex and has yet to subside. The result is that US managers have been able to focus more on growth and have begun to target and invest in international distribution, including the European market.

Equity recovery brought respite but leading managers are still focused on efficiency

Despite regulatory scrutiny, outsourcing is still a growing trend. Looking across all responding firms, fund accounting is a significant cost and is widely viewed as the greatest opportunity for cost reduction. Many managers are looking at their global footprint and investigating the opportunity to move to a center of excellence approach and/or a shared service center model. Offshoring is accelerating in the industry, managers are creating centers of excellence offshore or near shore, and the functions they are outsourcing are moving up the value chain to things like equity research. Just 17% of managers said their target location strategy involved limited or no near shoring or offshoring. Fifty-five percent want to maximise use of near shore locations, and 20% want to maximise the use of offshore.

Biggest may not be best

Medium-size managers appear to have globalised their operating model more than the largest managers, primarily because they have less complexity of product and geographical footprint and therefore can leverage their global model for efficiency. For example, creating a shared services organisation is a strategic decision that is implemented across as many functions as possible and is a relatively mature concept in investment operations. Most organisations already have central teams in place to handle most insourced functions but only a handful of larger firms have separate teams throughout the organisation for each separate functional area. Here, scale and complexity to consolidate outweigh the benefits.

Technology no longer creates a competitive advantage, but data does

Technology continues to be a challenge for managers – the volume of data and the multitude of applications across products and geographies needs to be carefully managed – especially in larger firms. With only a small number of vendors in the market, managers are rationalising and consolidating their platforms, resulting in little competitive advantage in technology any more. Data is becoming the differentiator. Access in terms of being able to analyse and use data for client, regulatory and management reporting is the new battle ground.

Donal O’Sullivan

FS Partner, Tax
Donal's Full Profile