Global survey of 300 investment managers details how evolving operations models, changing investment strategies and emerging asset classes impact views on outsourcing
Investment managers are most concerned about creating efficiencies across their operations in the next two years, followed closely by a focus on cost and enhanced quality and accuracy, according to a survey of 300 global asset management firms sponsored by Northern Trust.
Northern Trust today issued a white paper, The Next Chapter in Driving Growth in Asset Management, that offers insights into how asset managers can create greater efficiency and control costs by leveraging technology and outsourcing functions that may not be core to their investment process and viewing operations through the lens of their whole office, from front to back, including investment decision support activities and data management.
“As we are coming out of a two-year pandemic in which operating models were strained or challenged, there has been a renewed focus on efficiency, and how talent and technology can enable that,” said Ryan Burns, Head of Global Fund Services (GFS), North America. “The most successful asset managers are leveraging new technologies and operational approaches, while also seizing the benefits of outsourcing, to enable more efficient and effective decision-making.”
The survey, conducted for Northern Trust by WBR Insights, shows asset managers struggling with some of the same issues identified in a 2020 survey, while the global pandemic is causing many to look harder at outsourcing as a solution.
While 50% of respondents said their key strategic priority for the next two years will be creating greater efficiency, nearly as many (47%) also plan to focus on cost control and 45% said enhancing quality and accuracy was a top priority.
The new way of working following the global pandemic has influenced investment managers’ views about outsourcing. Particularly, respondents said the remote work environment (60%), cost of maintaining in-house capabilities (52%) and staffing challenges (51%) have increased their likelihood to outsource.
“There are many challenges facing managers – employee turnover, staff returning to offices, managing costs,” says Caroline Higgins, Head of Hong Kong, Macau and Taiwan. “With so many questions to be answered, the way forward is to look at all of these in a holistic manner covering people, technology, services and regulations. Our clients are proactively thinking of how to streamline their operations, and they have turned to outsourced providers like Northern Trust who can help them leverage technology to suit their business goals and objectives.”
Data management is seen as the area with the most potential for outsourcing, with nearly half (48%) of respondents considering outsourcing data management in the next two years. Approximately one-third are considering outsourcing foreign exchange, securities finance and middle office functions, and one in 10 say that supporting growth in crypto/digital assets is a priority, according to the survey.
“Asset managers today want flexibility to choose the best partners for their investment processes,” says Clive Bellows, Head of GFS EMEA. “For example, they want to be able to select a trading solution, or a foreign exchange provider, or a data management capability that fits the way they work. This optionality can support decisions that ultimately help drive alpha.”
The white paper The Next Chapter in Driving Growth in Asset Management can be accessed here.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 22 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2022, Northern Trust had assets under custody/administration of US$13.7 trillion, and assets under management of US$1.3 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Please visit our website or follow us on Twitter.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Please read our global and regulatory information.