ASSET MANAGEMENT MOVES INTO THE SPOTLIGHT

adapting to nEw paradigms

institutional invEstors

Assetsamonginstitutionalinvestorsaresettoriseinthecoming years, especially in pension funds and SWFs. Asset managers who hope to seize this opportunity in order to maintain or increase their share of institutional investor assets will have to do more than merely outperform benchmarks. They will also have to excel in governance, operational strength, and transparency, while ensuring a risk-based performance with appropriate fees. As the assetmanagement industrymoves into the spotlight to play a bigger role within the economy, regulators and policy makers will inevitably scrutinise it more closely. Therefore, the industry must make every effort to ensure that policy makers understand its function and role clearly. It would be fatal for the development of the industry and the recovery of the global economy if asset managers are regulated in the same way banks are - their operating models are entirely different. Comparing AuM of the industry or individual players with the balance sheets of banks is like comparing apples to oranges. Asset management does not pose the same systemic risk that banks pose to the economy. Fluctuations in asset values do not threaten the solvency of an asset manager as they would a bank. In addition, the leverage incurred by investment funds is significantly less than that incurred by banks. rEgulators and policy makErs

Not only is the time right for asset managers to redefine their relationships with key stakeholders, but new realities and opportunities demand an evaluation and, if necessary, an adaptation of operations. The rise of new technologies and investment andpartnershipopportunities innon-mainstream asset classes will have an impact on IT, human resources, risk management and compliance.

impact of nEw tEchnologiEs on assEt managEmEnt opErations

In the midst of increased competition, heightened regulatory scrutiny and new communication channels, asset managers who embrace and implement appropriate technologies may adapt to their new environment more easily. For instance, big data has not yet been adequately utilised within the asset management industry. Institutional investors are demanding improved risk management capabilities which require the analysis of large amounts of data. As investment strategies become more sophisticated in the search for alpha returns in increasingly efficient markets, managing and analysing large volumes of data will be a key component of investment decisions. Asset managers who can effectively use big data to provide deeper insights and sustainable returns will gain a competitive edge.

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