Synthetic intelligence (AI) was essentially the most raised concern 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.
General, 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 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 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 towards 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 purpose 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.
Based mostly 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 international buyers, however we needed to guarantee that our aperture was vast sufficient to seize the total pallet of drivers and traits impacting our shoppers. 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 12 months’s outcomes is that trade is dealing with rising complexities.
What Components Will Have Biggest Influence on Funding Efficiency?
We requested which components over the subsequent 12 months would have the best impression on funding efficiency. Over the subsequent 12 months, 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 traits they’ve been fascinated with 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 concern, 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 share as these fascinated with methods to convey personal markets into their corporations’ choices.
Generative AI: A Sport Changer
One huge dividend from our choice to increase the vary of matters on this 12 months’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 12 months’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 fairly that it’s settling right into a extra practical 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 terms of sustainability.
Personal Markets: A Puzzle to Remedy
Personal 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 in terms 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 worldwide 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 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 reveals that greater than half of respondents consider that index suppliers and the providers 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 12 months’s outcomes. I welcome your suggestions and solutions for future analysis.