Asset Owner Transformation
Introduction
Introduction from Milestone Group
Transformation can be iterative and incremental.
However, Milestone Group’s observations in general, and the findings revealed in this report suggest that the institutional investment industry, and Asset Owners in particular, are entering a phase of major transformation driven by scale, complexity, internalization and globalization, that spans operating models, technology, processes, people and providers.
While the drivers of, and impediments to, that transformation are well known, we expect the results will be surprising to many, and achieved far sooner than might be expected.
We hope you find this report to be an intriguing exploration of some of the factors driving and shaping the journey for Asset Owners across the globe.
Introduction from RBC Investor & Treasury Services
The struggle is real. As asset owners strive to achieve value from their data flows and meet the increasing needs of business and regulatory reporting requirements, this survey highlights some of the significant challenges facing owners. For example, 44% continue to rely on Excel or other repurposed technologies for asset allocations, resulting in increased costs and risks for owners. This is occurring at a time when transaction volumes continue to grow, and owners are expanding into new asset classes and geographies. Given these factors, it’s not surprising that 66% plan to run system automation projects in the next three years.
Spared the ESG governance pressures experienced by their European and Asian counterparts, North American asset owners are focusing on the nuts and bolts of investment performance, and many are looking to build new front-to-back operating models that provide scalability and safety.
As asset owners rethink what’s possible, they are choosing their own transformation adventure. While larger plans are insourcing investment management and working with software vendors to develop sophisticated asset management systems. Smaller plans, lacking the scale to warrant such investments, are consolidating with other plans or leveraging the strengths of their key partners, including master custodians, investment consultants and investment managers. The smaller owners are buying into the scale of their providers, benefiting from technology investments without having to incur the related cost or work effort.
At RBC, we remain committed to helping our clients think through these important decisions as they manage an unprecedented range of pressures. We hope you find this report useful and thank all participants who contributed insights.
Introduction from Citisoft
Citisoft is a global consulting firm dedicated to servicing the investment management industry. Our staff and management bring credibility and hands-on knowledge to every facet of our client relationships, backed by a history of successful partnerships with leading investment management firms and industry service providers. With our deep understanding of all aspects of the investment management process, our clients benefit from our ability to identify industry trends and accurately assess their effects. Through our Advisory and Delivery services, we offer a full complement of consulting capabilities ranging from strategy formation through guiding and implementing successful business change. We serve asset managers across the industry and globally, with notable expertise in the asset owner space. Whether working with a pension fund, insurer, foundation, endowment, OCIO, or family office, Citisoft helps asset owners understand built-for-purpose operating models, leveraging the optimal blend of technology and services for their business. Our strategic approach provides meaningful data, efficient operations, and a robust control environment to manage and monitor diverse multi-asset portfolios that must meet obligations effectively.
Introduction from Adapa Advisory
Transformation trends appear to be at more advanced stages globally than in Sub-Saharan Africa primarily due to a lack of scale particularly for smaller funds due to their inability to mobilize capital and resources relative to funds of scale.
Notable progress is, however, being made in terms of redefining strategies and operating models, whilst the active management and reporting on key factors like mandate compliance, performance attribution and ESG remains a challenge from a data point of view particularly where there are manual processes. This is being addressed through operating efficiency initiatives, reviews of ecosystems and consideration of master custody and other approaches. There is an expectation of continued momentum to address these issues in the near to medium term.
Opportunities for consolidation are increasing and some estimates suggest that as much as 80% of the market in South Africa operate in umbrella arrangements and the consolidation trend continues. Key drivers are increasing regulatory reform and operating risk.
