[ THOUGHT LEADERSHIP | NORTHERN TRUST ]
Fine-tuned efficiency drives performance in an orchestrated ecosystem
Recent asset manager industry surveys by Coalition Greenwich and Northern Trust , Boston Consulting Group ( BCG ) and PwC all point to the same conclusions regarding the health of the global investment management industry . The decade of ‘ easy money fuelled growth ’ is over and the next five to 10 years may look very different .
The core findings revolved around profitability . “ Over the past few years , asset managers costs have outgrown revenues by about 2 % … in a supportive market , this dynamic has been tolerable … times have clearly changed ”. BCG estimates that asset managers will need to address their revenue and costs in equal measure . “ Asset managers need to change … those that ( do ) stand to emerge strong and resilient for years to come .”
Furthermore , almost two-thirds of respondents to the Coalition Greenwich survey listed portfolio performance as their number one internal challenge with nearly half stating that cutting costs and increasing efficiency is a top strategic priority in the next three years .
Investment managers are in business to manage the assets of their underlying investors , so they generate an investment return and are paid for doing so . It
What do the high-performance sports of Formula 1 motor racing and America ’ s Cup class yacht racing have in common with portfolio investment performance ? Northern Trust ’ s global head of capital markets client solutions , Gerard Walsh , frames an analogy that all require an orchestrated ecosystem of solutions to help drive the highest possible performance outcomes .
makes sense for managers to focus everything they do on those two things .
High-performance sport is similarly disciplined in Formula 1 motor racing and America ’ s Cup class yacht racing . The singular focus and the difference between winning and also-ran status is an ecosystem built into the car or the yacht that delivers high speed and reliability – the equivalents of investment performance – at the exclusion of all other things .
The best performing teams tune their operations to the point where only equipment that tangibly adds value to the pursuit of first place is on the vehicle . There is no spare nut , no bolt , no rope , no line , no sail , nothing that dilutes the pursuit of excellence .
How can investment managers adopt the same high-performance mentality and deliver the same level of excellence ?
We believe it starts with a simple hypothesis – investment managers should focus their finite resources on functions that add tangible value to the pursuit of investment performance and work with trusted partners to deliver everything else .
40 // TheTRADE // Q3 2023