For money managers, implementing tech-driven efficiencies throughout the business will contribute to a competitive edge in the current landscape, said Taimur Hyat, chief operating officer at PGIM in Newark.
The use of automation to simplify and bring the down the cost of middle-office and back-office functions is where Hyat sees technology having the biggest impact on money managers.
John Delaney, senior director, investments, at Willis Towers Watson, said the continued downward pressures on fees and the need for asset managers to be more efficient has led many firms to invest in technology.
The asset management business is “still very much an industry that runs on Microsoft Excel,” Delaney, who is based in Philadelphia, said. As such, he expects to see more firms investing in better software and automation.
“Managers have their trading platforms, but they still do an awful lot of work in Microsoft Excel. As far as day-to-day portfolio management, it’s still reliant on manual spreadsheets,” Delaney added.
In April, BNY Mellon announced it was partnering with BlackRock to deliver integrated data, technology and asset management servicing capabilities to the firms’ common clients.
Through the move, BNY Mellon will integrate its data insights, accounting and asset servicing tools into BlackRock’s investment and operating platform for investment managers, called Aladdin, a news release said.
Allen Cohen, digital officer for BNY Mellon Asset Servicing, said the partnership allows for greater efficiency within firms, such as helping those in front-office roles, like portfolio managers using Aladdin, to get information from other parts of the business more quickly.
“From a portfolio manager perspective, having access to things like available cash, from half a day to a day sooner, allows you to make stronger decisions around your investment portfolio,” Cohen, who is based in New York, said.
Managers will also be challenged to lift the hood on fee arrangements with investor clients, said James Martielli, head of defined contribution advisory services at Vanguard Group.
“Savvier consultants and plan sponsors are going beyond the headline of expense ratios,” and looking further into details such as ownership structure and what portion of securities lending revenue is returned to asset owners, he said.
For instance, regarding securities-lending revenue, “how much is going to benefit the underlying shareholders that are taking on the risk vs. the asset management companies?” Martielli said.
In the year ahead, US money managers can also expect institutional investors to push harder for transparency in two areas in particular — fees charged for investment strategies and managers’ environmental, social and governance products, sources said.
Rakhi Kumar, senior managing director, head of ESG investments and asset stewardship at State Street Global Advisors said institutions will increasingly be asking what kind of financially material information firms are considering in their ESG process.
“I think the biggest challenge for asset managers is going to be giving clients clearer visibility and insight on how they are thinking about ESG from a fiduciary perspective. In the U.S., investors are starting to see ESG as a fiduciary responsibility,” Kumar added.