by Sean Kearns, Editor-in-Chief, Longitude
Technology has long been heralded as a game-changer for asset managers. However, new research among FT readers suggests the promise has yet to be fulfilled.
Nearly two-thirds of the 232 investment professionals we surveyed say that their businesses must improve the depth of collaboration between investment and technology specialists. At the same time, a third say that they struggle to source the talent necessary to exploit the full potential of AI technologies.
A rounded technology strategy, one that is embedded in the firm’s philosophy and across its operations, is fundamental. Almost a quarter of firms say that improving their digital infrastructure is a key strategic priority. And a similar proportion say they plan to use AI technologies at scale across the organisation over the next two years.
“It is not lost on anybody in our industry that technology as a source of competitive advantage has got to be our future,” says Doug Sharp, senior managing director and head of EMEA at Invesco. “Whether it is cost advantage or alpha generation or client engagement, technology is going to be an absolute differentiator for us.”
From the ability to analyse alternative and unstructured data for portfolio management to using RPA and the cloud to improve back-office functions, firms expect to reconfigure – and, in some cases, seemingly rebuild – their technology ecosystems over the upcoming two years. But with pressure on fees and budgets, fund managers will face some difficult technology trade-offs.
According to the FT research, four in 10 plan to invest in automated compliance/reporting technologies. A third will look to increase the size of their data science teams (a recognition of the role of machine learning and deep learning in financial modelling and analysis). Around a third expect to accelerate cloud migration.
Rapid digitisation – which has been accelerated even more by the pandemic – is one of the reasons why AWS saw its cloud computing sales rise last year, by 37 per cent to $62.2bn. Yet, according to research from Accenture, many asset managers are still in the early stages of cloud adoption – less than 10% saying they have ‘completed their cloud journey’.
The cloud promise of greater data storage, access and insight appeals to analysts as much as it does to technologists. In the research, it was also the technology considered most likely to improve client onboarding capabilities. For many firms, the objective is to link systems seamlessly, so they can respond swiftly to market, regulatory and client changes.
“In our company, we have an interface that links the back office to the front office,” says BEA Union Investment Management’s CEO Eleanor Wan. “We need to consider doing much more automation, because regulation development is fast, and we need to ensure data integrity. When the regulator is requesting information, we need to be ready. We are working hard to ensure that the technology is helping us to streamline some of the investment process.”
Investing in tech and the skills to exploit it
As Deloitte’s 2022 Investment Management Outlook puts it, firms are looking to develop “investment strategies supported by highly advanced digital capabilities”. According to Deloitte’s survey, 84% of US firms and 54% of European firms intend to increase spending on cloud computing and storage, for example, over the next 12‒18 months. However, as the report points out, such investment requires “first and foremost…a talent pool that can execute strategies to achieve their vision.”
But retaining and upskilling those individuals and teams won’t be easy. The investment sector is not immune to the global fight for technology talent – research by AIMA among hedge funds found that 90% were concerned about talent retention. The competitiveness of the digital market could explain why 41 per cent of firms in the FT research plan to invest significantly in training their teams in advanced analytics skills.
Securing the talent supply
As firms consider alternative ways to plug talent gaps, some will look to proprietary technology platforms provided by other asset managers. These can be an additional source of sizeable revenue. Amundi, for instance, is targeting £150m over the next five years.
Some firms will look to external partners, but managing these relationships remains a work in progress. In our research, 47 per cent of respondents agree that they need to improve the way they manage outsourced talent.
Investment in new technologies and a recognition that legacy systems must be left behind is merely the beginning. Finding a balanced strategy to sustain digital progress will bring the real returns.