ETF’s, leveraged ETF’s, robo advisory, fund of funds, and much more – the list of products and services rolled out by the asset management industry is ever-expanding. Facing demands for personalized financial solutions, competition, and stricter regulation, money managers today need a new playbook. And disruptive technologies, including Cloud, artificial intelligence (AI) and blockchain, have become the enablers of this self-renewal exercise.
Amid rising pressure on fees and margins, fund managers are embracing automation to minimize repetitive work and release bandwidth to help their staff focus on high-value tasks.
In parallel, asset managers are transforming legacy systems to optimize key business processes, and thereby, improve operating efficiency. This is where advanced technologies such as artificial intelligence (AI) and analytics platforms have started playing a major role. Since the sources and volume of data, across various internal and external systems, continue to rise exponentially, firms are now leveraging AI for making faster, informed decisions and identifying efficient trade execution mechanisms, among other activities. A leading U.K. money manager, for example, is harnessing machine intelligence to track and analyze a wide array of data sources including satellite imagery, social media, online reviews and consumer transactions, and generate alpha-worthy investment ideas.
Beside automation, AI and Big Data, many industry players have been enthusiastically adopting the Cloud. The growing influence of alternate data sources and AI necessitates increased storage and enhanced processing capabilities. Money managers require scalable, state-of-the-art technology that doesn’t entail high capital expenditure or onerous total cost of ownership. Given this imperative, Cloud is increasingly delivering a cost-effective, scalable solution to boost the agility and responsiveness of asset managers’ IT systems.
Many fund houses are increasingly leveraging cloud-based software-as-a-service (SaaS) to augment operations across different functions. A number of the large operators have deployed a blend of on-site and off-premise infrastructure, while small and midsize firms are sticking to off-site cloud solutions for enhanced efficiency and agility.
Another major disruption in the asset management industry’s IT playbook could come from the adoption of blockchain, the much-talked-about distributed ledger technology underpinning bitcoin. Recognizing the manually-intensive workflows and process duplication’s associated with buying and selling funds, some fund managers have already started exploring ways to streamline back-office administration functions for improved agility and cost savings.
For instance, rolling out a distributed market infrastructure could facilitate faster and accurate clearance and settling of trades, by eliminating the difference between a transaction and the clearing of the same. This would also lead to minimized counterparty risks and better capital availability.
Blockchain could also significantly improve data privacy and security across the asset management by offering an immutable record of all transactions and distributing records across multiple nodes.
Be it core operations, sales, product distribution, marketing, or customer service – every facet of money management is already being transformed by technological disruption. And, over the next decade, an asset management company’s maturity in the digital domain will be crucial in determining its relative performance as compared to that of its rivals. It’s high time for every fund house to ideate, experiment with new technology levers that can help them achieve tangible business goals, and differentiate themselves in a ultra-competitive marketplace.