In August 2017, CRISIL conducted an in-depth survey of top global asset managers (AMs) to understand their strategies amid a tightening regulatory environment. It covered 159 senior-level respondents, mainly based in the US and the UK, and revealed riveting trends and shifts in the asset management industry. Responding to the changes, AMs are revamping their research cost structure and adopting technology to engage with customers.
The MiFID II poser
Although the deadline for MiFID II implementation is just a few weeks away, most AMs are still deciding on their research payment strategy. However, we expect AMs to eventually absorb research costs. Many indicated that they would reduce external research budgets by 15-30%. They are likely to engage fewer than five bulge-bracket firms for waterfront coverage, and focus on niche tie-ups with specialists or regional players to devise strategy.
Challenges galore in fixed income
The fixed-income market has been grappling with issues such as reduced liquidity, search for higher yielding investments in a low interest-rate environment, and uncertainties related to research unbundling. AMs plan to counter reduced liquidity through sharper focus on exchange-traded funds and electronic trading platforms, and generate better returns through factor-based investing. Despite unbundling pressures, research spend will remain same for AMs here.
Big Data gaining prominence
AMs are in different phases of implementing Big Data solutions, and many of them are developing their first solutions. Most AMs prefer to set up data and analytics unit with largely an in-house team with partnership with external firms. Our survey indicates that AMs who have leveraged Big Data are satisfied with the results so far.
Beyond the hype of new technologies and digital channels
AMs are increasingly adopting new technologies and digital channels to change the way they deal with customers and intermediaries. The key challenges in the digital domain – of identifying the right technology and gaining access to the right talent – could be met by partnering with specialist firms.