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Linedata Mike de Verteuil

Asset managers have socio-economic and political concerns

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Social and geopolitical turbulence across Europe and North America are concerns for global asset managers, according to the 2017 Linedata Global Asset Management & Administration Survey.

When asked to forecast the most disruptive trends in asset management a year ago, asset managers highlighted industry-specific concerns: robo-advice (23.5 per cent), movement into alternatives (24.1 per cent) and cybercrime (33.5 per cent).
 
This year, those concerns remain but have been relegated to second-tier issues (11.6 per cent, 7.4 per cent and 17.9 per cent, respectively).
 
Nearly a quarter (24.2 per cent) of respondents highlighted political and policy change as the primary disruptive force in asset management: a concern that did not rank in last year’s survey. The Brexit vote, the election of Donald Trump and the possibility of a swing towards right wing populism in a host of European nations has become the year’s defining trend in the eyes of asset managers across all geographies.                                                               
 
While new concerns have become more prominent, the question of regulation continues to represent a major challenge for asset managers, although there were significant regional splits in the extent to which respondents prioritised this issue. Half (50 per cent) of all respondents categorised adapting to regulation as the number one concern today, with 53 per cent also seeing it as the biggest issue over the next three years. This means regulation has been the primary concern in six of the seven years Linedata has administered this research.
 
North American asset managers are relatively less concerned with regulation with only 40 per cent highlighting it as the main disruptor. This contrasts with French managers, 75 per cent of whom categorised regulation as their main concern.
 
Over half (54 per cent) of Asian managers view attracting new client assets as the top challenge.
 
With the implementation deadline just nine months away, MiFID II continued to grab a greater share of attention this year, just as it has done since 2013. Nearly half (47.4 per cent) of respondents reported that MiFID II was the most important regulation over the next three years, up from 39.6 per cent last year and 21.3 per cent in 2014.
 
Simultaneously, Dodd-Frank has come back into the public eye following the electoral promises of President Trump. While the far-reaching US regulation dropped from 45.1 per cent to 29.5 per cent between over the last 2 surveys, 2017 showed a small uptick in responses, with 33 per cent of those surveyed classifying it as the most important regulation over the next three years.
 
Against this backdrop, asset managers have also seen a convergence between an increasing regulatory burden, challenging investment conditions as investors continue to flock to low fee passive investments (34.3 per cent highlighted ‘investment performance’ as a major concern) and ongoing operational pressures (‘cost cutting’ was raised by 42.2 per cent of respondents). This led to 2017 being the year that asset managers re-evaluated their position in the market and resolved to carve a more distinctive niche against the competition. A fifth (20.4 per cent) of respondents sought to distinguish themselves with unique products or strategies. This superseded other factors including client service (17.3 per cent), investment performance and reputation (both 14.3 per cent).
 
Michael de Verteuil (pictured), business development director at Linedata, says: “The past year has brought a number of unexpected socio-economic and political shifts, and asset managers recognise that these events will continue to affect their business for years to come. Uncertainty is the ‘new normal’, and respondents to the 2017 Linedata Global Asset Management & Administration Survey have appreciated this at an early stage.
 
“The 2017 survey results describe a sector fully aware of the manifold challenges which face it. Alongside the ever-present impact of regulation, there is a growing emphasis on maintaining operational and technical agility in what may be uncertain times.”

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