Asset managers must broaden their skills as they look to develop new products, enter new market segments and meet the changing needs and expectations of investors, says Riccardo Lamanna, country head for Italy, State Street Global Services.
A wave of new investor demands has exposed a gap between their needs and asset managers’ ability to keep pace.
A State Street report, based on a global survey of 300 senior executives at asset management firms, reveals skills shortages in some fundamental areas. These include portfolio construction, the ability to assess and monitor risks across portfolios, and knowledge of increasingly complex compliance and regulatory requirements.
These gaps have been exposed by two main trends. First, investors increasingly demand multi-asset solutions — encompassing asset classes ranging from real estate and commodities to hedge funds and infrastructure. Two-thirds of asset managers (67 %) see this type of investment as most likely to drive growth in the next three years. At the same time, 74 percent of respondents agree that few asset managers have the capabilities required to thrive in a multi-asset investment world.
Second, asset managers are increasingly turning to new markets for growth, and this expansion forces them to demonstrate a broader range of skills. They must be able to navigate the regulatory demands of different jurisdictions, identify the right product and distribution channels for each new market, and deliver the required levels of transparency to both regulators and investors.
Bridging the gap
To address these skills shortages, asset managers plan to augment their expertise through recruitment, while also developing their existing employees’ capabilities. Over the next three years, more than half the asset managers in our survey (54%) plan to bring in new talent, while two-thirds (65%) expect to invest in training for their current teams.
The shift toward multi-asset solutions requires asset managers to build front-office teams with knowledge of a wider range of investments. They need to be able to construct and manage portfolios that use multiple assets in combination.
Investment will also be needed in technologies that support the building, testing, measuring and monitoring of these portfolios. More than four out of five firms expect to invest in these areas over the next three years. To see a return, they need investment professionals with the skills to use such tools.
An increased focus on risk, alongside performance, will further push asset managers toward exploiting the potential of portfolio data and analytics. More than four-fifths of firms (81%) see their data infrastructure as a priority for investment.
This investment in talent and tools is also required to cope with mounting demands for greater transparency. To satisfy compliance demands in many territories, asset managers need people and systems capable of producing a much more granular level of insight. Investors are also driving the focus on improved insight: 86% of asset managers say that those managers who provide the greatest level of transparency to clients have a competitive advantage in attracting new assets.
Making the right connection
Being able to build and support multi-asset solutions is one part of the challenge. Another requirement is to be able to market and advise on these products within the context of investors’ overall objectives. This requires a different set of skills.
A greater focus on client communication — both directly and through intermediary channels — will be invaluable as more investors look for outcome-based solutions.
Digital channels will also take on greater importance as asset managers target new client segments, including younger demographic groups such as the “Millennials”. Not only will these technologies provide new ways to engage with investors, they will also offer opportunities to mine data on investors and potential investors. Asset managers will need the skillset to keep pace with technological change.
Pathway to success
Asset managers are positive about the opportunities for growth. The vast majority (79%) rate their growth prospects over the next 12 months highly.
Unlocking this growth will rely on their ability to retain, develop and attract people with the right skills and experience. They need investment professionals with multi-asset expertise, backed by distribution strategies that promote solutions rather than products.
Technology — and those proficient in using it — will play a vital role. This includes both the powerful analytics tools that can turn complex data into valuable insight, and the digital channels that will help asset managers reach and engage investors of the future.
The shift to multi-asset solutions will ignite a new phase in the war for talent. The success with which asset managers’ compete in this arena will determine how well they perform in the emerging investment environment.