Synthetic intelligence (AI) was probably the most raised challenge previously 12 months amongst asset supervisor respondents to the annual Index Business Affiliation (IIA) member survey. Sustainable investing, thematic investing, and customised funding, respectively, ranked as prime of thoughts after AI amongst survey respondents.
General, the outcomes illustrate that the asset administration business in Europe and America is in transition, going through mounting ranges of complexity and a necessity for brand new partnerships, new and extra specialised info sources, new abilities, and stronger ecosystems and alliances.
Background
4 years in the past, IIA started publishing a survey in partnership with our member companies and fielded with the help of Opinium Analysis. Annually, we interact with 300 chief funding officers, portfolio managers, and chief monetary officers throughout a variety of funding suppliers in the USA and Europe to gauge how asset managers view progress in opposition to present challenges and alternatives, and the important thing elements shaping the longer-term evolution of the business.
After we began this endeavor in 2020, the aim was to verify index suppliers understood the longer term wants of asset managers by way of environmental, social, and governance (ESG)- and sustainable-related indexes.
Primarily based on our learnings during the last three years and suggestions from our IIA members, we determined to broaden the 2024 survey past ESG- and sustainable-related questions. ESG and sustainable investing after all stay central and materials to international buyers, however we wished to ensure that our aperture was extensive sufficient to seize the total pallet of drivers and tendencies impacting our shoppers. I’m so glad we took this method as our findings revealed a a lot deeper set of challenges, alternatives, hopes, and issues. What is obvious from this yr’s outcomes is that business is going through rising complexities.
What Elements Will Have Biggest Impression on Funding Efficiency?
We requested which elements over the subsequent 12 months would have the best affect on funding efficiency. Over the subsequent yr, asset managers are extra keenly centered on macroeconomic points like rates of interest, inflation, and a possible financial slowdown than they’re elections and geopolitical occasions. Notably, 81% of US respondents prioritized rates of interest and inflation as an important points.
We requested managers what tendencies they’ve been fascinated about probably the most over the past 12 months. I used to be shocked by the substantial variety of respondents who ranked AI as their most raised challenge, overtaking sustainable investing. Different technological points like tokenization and blockchain had been solely raised by roughly 10% of managers. Managers centered on thematic funding and customised merchandise after sustainable investing. Solely about 25% recognized crypto merchandise as a subject they’re discussing with their colleagues — about the identical proportion as these fascinated about how one can deliver personal markets into their companies’ choices.
Generative AI: A Sport Changer
One large dividend from our resolution to broaden the vary of subjects on this yr’s survey is the insights we gained round AI, and what it means within the eyes of asset managers.
ESG Exuberance Tempers
We revisited ESG and sustainable investing on this yr’s survey to see if the torrid tempo of development cited in prior years was persevering with. What we discovered is that whereas ESG continues to be an important a part of international asset managers’ technique, the excessive expectations for future development we noticed in prior years of the survey have tempered.
When considered over the four-year arc of the survey, survey respondent expectations for ESG portfolio implementation have come again to earth after the spike we noticed in 2022 and 2023, touchdown again down close to 2021 ranges. For us, this means not that ESG goes away, however slightly that it’s settling right into a extra real looking long-term development curve. As soon as once more, environmental elements (the “E” in ESG) proceed to be most on the radar of buyers on the subject of sustainability.
Non-public Markets: A Puzzle to Resolve
Non-public markets proceed to be an space of alternative for international asset managers but additionally an space of problem, in accordance with our survey. Whereas asset managers just like the idea of personal markets for funding alternative and diversification, they cited a number of challenges on the subject of implementation.
Issue integrating personal fairness into their funding lineup, liquidity issues, and information gaps had been cited as top-of-mind points. This isn’t stunning given the traditionally gradual tempo of the event of world indexes which seize personal fairness market information and efficiency.
Index Suppliers in Demand
Whereas our survey identified a number of classes that characterize important challenges for our shoppers, it was encouraging to see that asset managers’ prime 4 areas to accomplice with index suppliers are for sustainable investing, direct indexing, thematic investing, and customised funding options. The survey exhibits that greater than half of respondents consider that index suppliers and the companies we provide will develop into extra essential to their success within the subsequent 12 months. Importantly, about 20% anticipate to make use of extra index suppliers within the subsequent 12 months.
This can be a very high-level snapshot of our survey findings. I invite you to take a deeper dive into this yr’s outcomes. I welcome your suggestions and solutions for future analysis.
