Yet looking ahead to the second half of this year and beyond, significant hurdles remain for asset managers. Economic uncertainty lingers, investors are becoming ever more demanding, and the full potential of “money in motion” will be difficult to capture.
In particular, in a two-speed world in which emerging markets are poised to grow the fastest, asset managers based in mature markets face a fundamental question. Should they abandon hope of substantial growth at home, putting all their energies into far-flung territories? The answer is no, they should not. Because, despite the acknowledged attraction of high-growth economies, the truth is that expanding one’s footprint in mature markets can in fact be achieved. But asset managers must follow some critical steps.
● Stick to what you do best.
Now more than ever, investors are looking for some degree of certainty about the security and growth potential of their investments. Amid virtually limitless investment choices, just making sure that you know your strengths and deliver what you advertise “on the label” can be a true differentiator.
● Remember who your customers are.
Too many retail asset managers still perceive distributors, not private investors, as their end customers. And relatively few asset managers have fully exploited opportunities to better understand what private (as well as institutional) investors really want.
● Know your distributors better, too.
As the battle for shelf space heats up, asset managers must still ensure that their products are getting sufficient display. They can help themselves by strengthening sales support in a number of areas, such as providing better training on products, backing up advisers on specific investment solutions, and being an active thought partner with distributors on new sales approaches.
● Streamline your product portfolio.
Too many asset managers tend to keep underperforming products on the shelf too long. To achieve the most robust offering, they must review and prune their portfolios regularly.
● Don’t give up on innovation.
At this stage of the game in mature markets, can anything be truly new? In fact, the products of tomorrow will by necessity require multiple competencies that have not necessarily been combined before. Asset managers that search for (and identify) innovative solutions will have a distinct advantage.
● Master the regulatory climate.
The financial crisis obviously gave large momentum to the development of market reforms. Both retail and institutional asset managers in mature markets must keep fully abreast of all such measures in order to provide steady guidance to clients and adapt their own business models.
● Be stingier on resource allocation.
Asset managers cannot afford to devote the same resources to less profitable clients (or products) as they do to highly profitable ones. They will need to differentiate service levels according to the profit contribution from the particular investor or product. This often means making investment in management information systems, a plunge that many global asset managers have yet to take.
Overall, of course, it’s safe to say that the rebound from the financial crisis has been confirmed. The global value of professionally managed assets rose by 8 per cent to $56,400bn in 2010, following a gain of 13 per cent the previous year. Many investors believe that the worst is over, but they expect a low-growth environment for at least two more years. Achieving some of this expansion in mature markets will be crucial to long-term success. And contrary to popular belief in some quarters, it can be done.
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