Synthetic intelligence (AI) was essentially the most raised challenge prior to now 12 months amongst asset supervisor respondents to the annual Index Trade Affiliation (IIA) member survey. Sustainable investing, thematic investing, and customised funding, respectively, ranked as high of thoughts after AI amongst survey respondents.
Total, the outcomes illustrate that the asset administration trade in Europe and America is in transition, dealing with mounting ranges of complexity and a necessity for brand spanking new partnerships, new and extra specialised data sources, new expertise, 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 Analysis. Every year, we have interaction with 300 chief funding officers, portfolio managers, and chief monetary officers throughout a variety of funding suppliers in the US and Europe to gauge how asset managers view progress in opposition to present challenges and alternatives, and the important thing components shaping the longer-term evolution of the trade.
After we began this endeavor in 2020, the aim was to verify index suppliers understood the longer term wants of asset managers when it comes to 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 in fact stay central and materials to international traders, however we needed to make it possible for our aperture was vast sufficient to seize the total pallet of drivers and tendencies impacting our purchasers. I’m so glad we took this strategy as our findings revealed a a lot deeper set of challenges, alternatives, hopes, and considerations. What is obvious from this yr’s outcomes is that trade is dealing with rising complexities.
What Elements Will Have Biggest 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 targeted 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 tendencies they’ve been interested by essentially 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 targeted 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 interested by easy methods to deliver personal markets into their corporations’ choices.
Generative AI: A Recreation Changer
One large dividend from our resolution to develop 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 progress cited in prior years was persevering with. What we discovered is that whereas ESG remains to be an important a part of international asset managers’ technique, the excessive expectations for future progress 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 slightly that it’s settling right into a extra sensible long-term progress curve. As soon as once more, environmental components (the “E” in ESG) proceed to be most on the radar of traders in the case 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 response to 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.
Problem integrating personal fairness into their funding lineup, liquidity considerations, and information gaps had been cited as top-of-mind points. This isn’t shocking given the traditionally sluggish 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 vital challenges for our purchasers, it was encouraging to see that asset managers’ high 4 areas to associate with index suppliers are for sustainable investing, direct indexing, thematic investing, and customised funding options. The survey reveals that greater than half of respondents imagine that index suppliers and the providers we provide will develop into extra vital to their success within the subsequent 12 months. Importantly, about 20% count on 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 options for future analysis.
