Overview of the industry
The last two years have seen an extraordinary amount of change in the asset management industry. The industry’s ability to renew itself has never been more important. There is a growing recognition that, this time around, the recovery will demand more change by market participants.
One of the certainties, in this tumultuous environment, is that the asset management industry is at a critical juncture, beyond which it will look very different than it does today. Asset managers are facing new challenges, particularly as a result of new regulations. Some of the issues have a greater impact on funds in different locations or of different sizes, but no matter where a fund management company is based, a fund is domiciled or the size of the fund or the manager, these challenges are universal.
The trend of traditional asset managers and alternative fund managers adopting each other’s investment strategies is having a profound impact on both ends of their models: distribution will have to change as each strategy tries to attract investment dollars from a new constituency, and the back office support of these managers has to keep pace with their changes and evolving needs.
One model may have worked for alternative managers whose end investors were sophisticated institutional investors or for fund managers who hadn’t previously contended with the demands of an institutional client. These managers are finding they have to change their approach as well as their fee models. If they don’t, regulators may do it for them.
Our look at UCITS IV examines how the changes to the UCITS framework could require fund managers to alter their operating models to best take advantage of the latest iteration of enabling legislation. While the decision to operate an offshore model or on-shore model used to be straightforward, anyone wanting to manufacture UCITS funds will be able to choose the business models that suit them best.
Distributors have become a far stronger influence and we discuss how the industry focus is shifting from production to distribution. While performance remains one of the most important factors when investors choose a fund, the ease of accessing and keeping track of their investments is increasingly important, too.
As a result, distribution is becoming just as critical a factor as performance in determining a fund’s success, and will be addressed with renewed vigour. In addition to UCITS IV, there is a raft of financial regulation being proposed, through which regulators hope to establish a framework to avoid systemic risk to ensure the stability of financial markets and to protect consumers. While some of the most widely debated proposals do not directly impact fund mangers, there are some critical regulatory issues that all fund managers should consider. These include the European Commission’s proposed Directive on Alternative Investment Fund Managers, depositary regulation and, for asset managers that are part of an insurer, Solvency II, among others. These directives could have a profound impact on asset managers.
Recruitment trends in the industry
Actors in the Asset Management industry take on more staff, in line with their growth and general talent requirements. Investor confidence has apparently returned and risk appetite is up. But getting that to translate into investment mandates is still a challenge. We are spotting more opportunities, people are expanding investment analysis teams or recruiting new portfolio managers. All the regulatory changes impacting the asset management industry will also offer opportunities for experienced talent with background in risk and compliance.
Asquare Partners has acquired deep vertical knowledge in Asset Management. Our team operates in all sectors of Asset Management to help our clients strengthen their team and assess talents who will support the organisation to succeed in their mission.
Asquare Partners actively recruits the functional practices below in the following segments within the asset management industry: