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Synthetic intelligence (AI) was essentially the most raised challenge up to now 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.
Total, the results illustrate that the asset administration business in Europe and America is in transition, dealing with 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 corporations and fielded with the help of Opinium Research. Every year, we interact with 300 chief funding officers, portfolio managers, and chief monetary officers throughout a variety of funding suppliers in america and Europe to gauge how asset managers view progress towards present challenges and alternatives, and the important thing components shaping the longer-term evolution of the business.
After we began this endeavor in 2020, the objective was to ensure index suppliers understood the long run wants of asset managers by way of environmental, social, and governance (ESG)- and sustainable-related indexes.
Primarily based on our learnings over the past 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 world buyers, however we needed to ensure that our aperture was extensive sufficient to seize the total pallet of drivers and traits impacting our purchasers. I’m so glad we took this method as our findings revealed a a lot deeper set of challenges, alternatives, hopes, and considerations. What is evident from this yr’s outcomes is that business is dealing with rising complexities.
What Elements Will Have Best Impression on Funding Efficiency?
We requested which components over the following 12 months would have the best affect on funding efficiency. Over the following 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 crucial points.
We requested managers what traits they’ve been serious about essentially the most over the last 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 have 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 share as these serious about the way to convey non-public markets into their corporations’ choices.
Generative AI: A Sport Changer
One huge dividend from our determination to broaden the vary of matters 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 remains to be an important a part of world asset managers’ technique, the excessive expectations for future development we noticed in prior years of the survey have tempered.
When seen 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 quite that it’s settling right into a extra sensible long-term development curve. As soon as once more, environmental components (the “E” in ESG) proceed to be most on the radar of buyers in the case of sustainability.
Personal Markets: A Puzzle to Resolve
Personal markets proceed to be an space of alternative for world asset managers but in addition 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 in the case of implementation.
Issue integrating non-public fairness into their funding lineup, liquidity considerations, and information gaps have been cited as top-of-mind points. This isn’t shocking given the traditionally gradual tempo of the event of world indexes which seize non-public fairness market information and efficiency.
Index Suppliers in Demand
Whereas our survey identified a number of classes that symbolize important challenges for our purchasers, 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 imagine that index suppliers and the companies we provide will turn 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.
It is a very high-level snapshot of our survey findings. I invite you to take a deeper dive into this year’s results. I welcome your suggestions and recommendations for future analysis.
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