Driving Growth in Asset Management 2024: A Northern Trust Whitepaper

In Q1 of 2024, WBR Insights, in partnership with Northern Trust, surveyed 300 CEOs, CIOs, Directors of Operations and senior executives across APAC, EMEA and North America. The survey sought to determine how strategies have changed since 2022, given the current ecosystem of market and industry influences. Below are some key summaries of the report's findings, and some of the insights obtained.

If you would like to uncover the full findings from the whitepaper, you can download your free copy here.

Strategic priorities: Looking toward the future

Asset managers are prioritizing investor experience over cost control. They are leveraging new technologies and data science to improve quality, accuracy, and product offerings. This shift is driven by the need to meet evolving client needs and navigate a changing market environment.

Key findings

• Investor experience is now a top priority for asset managers.
• New technologies and data science are seen as critical for improving quality and accuracy.
• Infrastructure, real estate, and fixed income are gaining traction as asset classes.
• Product strategy changes and technology adoption are key to success.
• Interest rates will play a role in product selection.

New approaches to increased distribution

Asset managers need to have effective distribution strategies to reach the right audience with the right products. This is especially important because investor needs vary significantly throughout their investment journeys. For example, early career investors need different products compared to those nearing retirement. Asset managers are leveraging technology to improve distribution channels and target new markets. They are investing in advanced investment platforms that offer investors increased agility, flexibility, and efficiency. New technologies are also helping managers make informed decisions about where and when to expand distribution.

Data sourcing emerged as a major challenge when launching new products and entering new markets. The entire survey emphasizes the need for enhanced data management capabilities. Launching new products or entering new markets requires a constant stream of timely, relevant, and accurate data, especially in challenging markets. Changing market structures like T+1 further complicate distribution efforts, making data sourcing even more crucial.

Maximizing efficiency

Asset managers are turning to outsourcing in a big way. This is not new, but the trend is accelerating in 2024. There are two main reasons for this: cost reduction and a lack of internal resources. By outsourcing, firms can gain access to the latest technologies and expertise, ultimately improving the quality of their products.

Cost is a major driver. Over a quarter of respondents plan to outsource non-core activities like securities finance, liquidity management, and trading. Outsourcing these tasks to specialists frees up resources and can lead to significant savings.

Data management is the hottest area for outsourcing, with 83% of respondents considering it in the next two years. This aligns with the growing focus on data for distribution and product strategy. Outsourcing data management allows firms to leverage advanced data technology from providers, saving them time and money on in-house development. This translates to faster operational scaling for asset managers.

Data management

Data management is a critical aspect of delivering a good investor experience for asset managers. Accurate and timely data is essential for informed decision-making by asset managers. The survey highlights that data management remains a major challenge for asset managers. Data sourcing and consistency are identified as the biggest challenges, especially for ESG offerings. To address these challenges, asset managers are increasingly turning to outsourcing data management. However, it is important to have a clear understanding of data needs and business priorities before engaging with outsourced providers.

Asset managers are increasingly outsourcing data management due to the complexity of data needs, particularly in areas like ESG offerings. These specialty providers offer significant advantages:

• Advanced Data Tools: They invest in cutting-edge technology like data science, data warehouses, and AI (widely adopted in 2023).
• Expertise and Resources: Asset managers gain access to expertise and resources they may not have in-house.

By outsourcing, asset managers can optimize data management, a crucial factor in today's focus on product quality, accuracy, and ultimately, a superior investor experience. These providers equip managers with the resources and new technologies to deliver valuable insights when needed most.

Conclusion

The asset management industry has shifted priorities. While cost control was key before, focus is now on quality and investor experience. Managers are refining product offerings and embracing technology like AI to be more efficient. Outsourcing is on the rise, with data management being a top area. By leveraging external expertise, firms aim to enhance data tools, support the front office, and ultimately deliver a superior investor experience.