Our 2017 Outlook IP Times of Change: A Look Back and a Look Ahead at the Biggest Trends in Asset Management Tech and Ops was released this week with a nod to this year’s Nobel Prize winner for Literature, Bob Dylan. Whether we like it or not, “The Times They Are A Changin’,” and despite our industry’s laggard reputation, even the most staid investment managers are sensing a change in the air. Politics, industry consolidation, and the FinTech ‘revolution’ dominated headlines in 2016 and, in many ways, we are beginning to feel the impact of this shakedown. What tech and ops trends should the asset management community be prepared for in 2017? We don’t hold a crystal ball, but below is a snapshot of a few key trends covered in our latest IP.
The New Normal Political Landscape
A resurgence of populist sentiment dominated headlines over the course of last year… who are we kidding—it dominated every holiday party, family gathering, conference, and PTA meeting too. Our industry didn’t go untouched, and despite much uncertainty around Brexit and the incoming Trump administration, we’re betting the impact of the ‘new normal’ political landscape will truly be felt in 2017. Our quick take: corporate tax reform might have a significant impact on US companies, the global operating model could take a hit from protectionism, and returns on traditional investments may continue to slow.
If it sounds like we’re equivocating, that’s because we are. We think your best bet in 2017 is to hope for the best but prepare for the worst with a renewed focus on risk management. Want more specifics? Download our 2017 Outlook.
The FinTech Zeitgeist
FinTech seriously sunk its teeth into our industry in 2016. Generally speaking, we think there’s a whole lot of noise about some very early stage innovation, but we’re far from immune from jumping on the bandwagon (see: Buy-Sider’s Guide to Blockchain). If nothing else, the FinTech zeitgeist has proven that there is a real appetite for innovation in asset management, and that’s a change in tune. Should asset managers join a blockchain consortium or two and invest heavily in artificial intelligence this year? Probably not, but keep an eye on the blue-chip firms who are working on some truly cutting edge technologies.
It’s All About the Data
We really can’t overstate this trend—every investment and innovation that we’re seeing in asset management boils down to data. As Citisoft’s data gurus put it in our IP: “We are no longer on the verge of data disruption; we are there.” We’re seeing service providers invest heavily in data-as-a-service, asset managers spend big on data-driven operating models, and data governance finally getting some of the respect it deserves throughout the organization. Data is becoming the core focus across every investment management function and if you haven’t drunk the kool-aid yet, we suggest you do.
Tech and Ops Investments
Where are budgets headed in 2017? Mostly the front office. As portfolio managers increase their investments in multi-asset class portfolios, outdated technologies can’t keep pace with the complexity of these strategies. Legacy systems are being overhauled and data-driven tools that help bring middle office functions (like risk and attribution) to the front office are being implemented en masse. As the portfolio manager’s job continues to grow in complexity, tools that support intraday decision-making will become vital for capturing alpha.
A Hard Lesson in Vendor Risk Management
Our last point brings us to POINT. Barclays POINT was the gold standard platform for risk and attribution and performed a wide array of functions that made it an indispensable tool for many in the fixed income community. Just over a year ago, Bloomberg announced it had acquired the Barclays BRAIS unit, and would retire POINT just 18 months post deal-close.
This announcement came as a shock to almost every POINT user and left us asking: should we have seen this coming? Perhaps. If there’s any lesson from this that we think firms will carry through in 2017, it is that vendor risk management is more important than ever with the growing trend of industry consolidation. For best practices on vendor management, check out our recent IP Systems and Vendors: A Joint Choice.
For more of our recap on 2016 and perspective on what asset managers can expect this year, download our full IP Times of Change: A Look Back and a Look Ahead at the Biggest Trends in Asset Management Tech and Ops. And with that, I’ll leave you with one more piece of advice from Mr. Dylan on navigating the changing tides: “you better start swimming or you'll sink like a stone.”
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