Artificial intelligence (AI) was basically probably the most raised concern to date 12 months amongst asset supervisor respondents to the annual Index Enterprise Affiliation (IIA) member survey. Sustainable investing, thematic investing, and customised funding, respectively, ranked as excessive of ideas after AI amongst survey respondents.
Whole, the outcomes illustrate that the asset administration commerce in Europe and America is in transition, going by means of mounting ranges of complexity and a necessity for model new partnerships, new and additional specialised knowledge sources, new skills, and stronger ecosystems and alliances.
Background
4 years prior to now, IIA began publishing a survey in partnership with our member firms and fielded with the help of Opinium Evaluation. Yearly, we work together with 300 chief funding officers, portfolio managers, and chief financial officers all through quite a lot of funding suppliers within the US and Europe to gauge how asset managers view progress in the direction of current challenges and alternate options, and the vital factor elements shaping the longer-term evolution of the commerce.
After we started this endeavor in 2020, the purpose was to confirm index suppliers understood the long term desires of asset managers in the case of environmental, social, and governance (ESG)- and sustainable-related indexes.
Primarily based totally on our learnings over the last three years and solutions from our IIA members, we decided to broaden the 2024 survey previous ESG- and sustainable-related questions. ESG and sustainable investing the truth is keep central and supplies to worldwide merchants, nevertheless we wished to ensure that our aperture was huge ample to grab the whole pallet of drivers and developments impacting our purchasers. I’m so glad we took this technique as our findings revealed a lots deeper set of challenges, alternate options, hopes, and points. What is clear from this yr’s outcomes is that commerce goes by means of rising complexities.
What Elements Will Have Greatest Have an effect on on Funding Effectivity?
We requested which elements over the next 12 months would have the perfect have an effect on on funding effectivity. Over the next yr, asset managers are further keenly centered on macroeconomic factors like charges of curiosity, inflation, and a attainable monetary slowdown than they’re elections and geopolitical events. Notably, 81% of US respondents prioritized charges of curiosity and inflation as an vital factors.
We requested managers what developments they’ve been enthusiastic about basically probably the most over the previous 12 months. I was shocked by the substantial number of respondents who ranked AI as their most raised concern, overtaking sustainable investing. Totally different technological factors 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% acknowledged crypto merchandise as a topic they’re discussing with their colleagues — concerning the similar proportion as these enthusiastic about simple strategies to convey personal markets into their firms’ selections.
Generative AI: A Sport Changer
One large dividend from our dedication to broaden the range of issues on this yr’s survey is the insights we gained spherical AI, and what it means inside 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 improvement cited in prior years was persevering with. What we found is that whereas ESG continues to be an important part of worldwide asset managers’ approach, the extreme expectations for future improvement we seen in prior years of the survey have tempered.
When thought of over the four-year arc of the survey, survey respondent expectations for ESG portfolio implementation have come once more to earth after the spike we seen in 2022 and 2023, landing once more down near 2021 ranges. For us, this implies not that ESG goes away, nevertheless barely that it’s settling proper right into a further smart long-term improvement curve. As quickly as as soon as extra, environmental elements (the “E” in ESG) proceed to be most on the radar of merchants in relation to sustainability.
Private Markets: A Puzzle to Treatment
Private markets proceed to be an area of different for worldwide asset managers however moreover an area of drawback, in line with our survey. Whereas asset managers similar to the thought of private markets for funding various and diversification, they cited a lot of challenges in relation to implementation.
Subject integrating personal equity into their funding lineup, liquidity points, and data gaps had been cited as top-of-mind factors. This isn’t beautiful given the historically sluggish tempo of the occasion of world indexes which seize personal equity market data and effectivity.
Index Suppliers in Demand
Whereas our survey recognized a lot of lessons that characterize important challenges for our purchasers, it was encouraging to see that asset managers’ excessive 4 areas to confederate with index suppliers are for sustainable investing, direct indexing, thematic investing, and customised funding choices. The survey reveals that higher than half of respondents think about that index suppliers and the suppliers we offer will develop to be further essential to their success inside the subsequent 12 months. Importantly, about 20% depend on to make use of additional index suppliers inside the subsequent 12 months.
It’s 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 solutions and concepts for future evaluation.
