In 2020, the global asset management industry experienced a decline of 8.8%. While volatile market conditions, rising cyber risk, and stringent regulations have contributed to this negative growth, the outlook for 2021 is not exactly encouraging as the negative factors are unlikely to abate.
This negative growth is industry-wide, with the ramifications reaching far into branches such as digital asset management, enterprise asset management, fixed asset & IT asset management as well.
As a result, key players in this domain are turning to a technology-driven revamp strategy to breathe new life into the industry.
Draup’s research indicates that advances in Artificial Intelligence (AI), Internet of Things (IoT) and infrastructure automation, coupled with the continued integration of analytical and business intelligence tools in asset management solutions, are expected to drive transformation efforts.
Apart from this, asset managers have been buying up their peers to expand their offerings and asset bases so they can competitively price their products.
Emerging Trends in the Asset Management Industry
The total global Assets Under Management (AuM) is set to double to USD 145.5 Trillion by 2025 despite a slight downtick in investor confidence and a liquidity crisis due to the COVID-19 pandemic.
Our research indicates that there is strong support for quantitative easing, increased consumer spending, and a historically low unemployment rate in the regions poised to show the maximum growth.
More importantly, analysts predict that there are two key factors that complement the above when it comes to bolstering the industry, viz, i.) A rapidly improving technology stack, and ii.) A decision-making culture motivated by automation & analytics.
Technology Use Cases Driving Change in Asset Management
Fintech firms have doubled down on their investments in AI/Robotics to power investment solutions. The result is a fundamental shift in the way asset management companies do business and manage their clients.
Some key technologies and their associated use cases can be seen below
Key players are partnering with startups and service providers to implement the above use cases.
- J.P. Morgan partnered with StatPro to develop a Multi-Asset Portfolio Analytics solution for asset managers. This solution utilizes StatPro’s cloud-based portfolio analytics technology to enable front-office decision-makers to manage their risk and performance dynamically.
- IndiGrid signed a multi-year collaboration agreement with IBM to build Artificial Intelligence (AI)-enabled asset management platform. This collaboration with IBM enables IndiGrid to transform the sector transformation from conventional-corrective practices to preventive and resilient-RCM approaches.
The transformation is evident in the industry’s attempt to reinvent its business with the rapid adoption of cutting-edge technologies.
Two key areas receiving the bulk of the interest from Asset Management companies, especially from an R&D perspective for future adoption, are:
- Natural Language Processing: The main applications of NLP are credit scoring, fraud detection, customer service, chatbots, and document search and processing for business intelligence
- Quantum Computing: Quantum computing’s combinatorial optimization capabilities enable investment managers to improve portfolio diversification and rebalance portfolio investments to respond more precisely to market conditions and investor goals.
Business Transformation in the Asset Management Industry
Investments are pouring into service providers who are driving innovations in Financial Management, Investment Management & Investment Advisory, Liquidity Management, Financial Security & Investment Data Analytics.
- J.P. Morgan Asset Management partnered with Calastone to introduce new levels of automation to money market funds via its Morgan Money trading platform. It enhances the entire settlement process, bringing automated settlements to the platform.
- State Street, along with S&P Global and CPA.com, invested in Lukka, a cryptocurrency data provider. The partnership underscores State Street’s broader commitment to innovation as its institutional clients adopt digital assets.
- The Bank of New York Mellon collaborated with Arria NLG, a natural language generation technology company to help asset managers and asset owners transform data into actionable analytics.
While these applications are encouraging, service providers should instead focus on more sub-vertical level use cases for optimal engagement.
- System Integration Services
- Server, Network, Application Maintenance Desktop Management
- BI / Analytics
- Datacenter Management
- Application Modernization and others
Service providers who are experienced in delivering cutting-edge solutions in the above sub-verticals stand to win a lot of deals in the Asset Management industry as it tries to make up for lost time & effort by rapidly scaling its digital transformation efforts.
Download the whitepaper to view a complete list of key opportunity areas for service providers and pointers on targeting them.