Redefining Asset Management To New Global Realities


By M. Isi Eromosele

With currency and debt issues at the forefront, the world's financial markets remain volatile and uncertain. While uncertainty opens up opportunities for astute asset managers, it also exposes them to significant risks.

Many asset managers are struggling to chart a clear course toward sustainable growth and strengthened competitiveness given the new realities in global financial markets and the asset management industry.

As such, it is time to take a fresh look at asset management in light of the fundamental changes that are now taking place in global markets.

Asset Management

There are four key factors that are vital to an understanding of the asset management industry. The first is the essential nature of the asset management market, the assets invested and the regulations to which the market is subjected.

Second, analysis of the business models operated by market players and their value creation logic gives a better understanding of how and where value can be generated.

Clients and their needs, with a distinction drawn between private and institutional investors are the third key factor. Lastly, market offerings and how they are likely to develop.




Asset management comprises three concepts: asset structuring, investment management and investment management services.

  • Asset structuring refers to all activities that play a part in structuring or "wrapping" assets (i.e. building a shell or umbrella around assets or portfolios of assets, as is the case in fund-of-funds solutions, for example). Long-term asset allocation linked to possible liabilities is a core result of this process.  
  • Investment management is the core discipline in "classical" asset management. Although the terms are often used interchangeably, investment management refers only to the investment decisions made on a day-to-day basis within the limits of the defined asset structure.
  • Investment management services include elements of financial analysis/ research, plan implementation (e.g. trading services), ongoing monitoring of and risk analysis for investments and comprehensive reporting on value added and value at risk, for example.

Distribution concerns itself with how asset management services and solutions are sold to either institutional investors or private investors (e.g. via funds). Distribution channels vary widely depending mainly on the business model.

There are three main drivers of structural change in the global market that have a powerful bearing on the asset management industry. One is a shift in the global weighting of assets under management, as rising prosperity in emerging markets tilts the scales toward Asia in particular.

The second involves changes in the regulatory landscape (with regard to pension plans, for example), which will directly and indirectly affect asset managers. And perhaps even more fundamentally, the third driver is the aging population and the general demographic shift that the world is experiencing. As demographic patterns change, so does the spread of asset holders and what they do with the funds they have to invest.

What Do Clients Want?

In what is a traditionally product-driven industry, the balance of market power is gradually shifting toward the retail and institutional investment clients that make up the demand side of the equation.

Though clients long willingly trusted their advisors to "know best", they are now becoming better informed, more professional, more focused on outcome-driven      investing and more willing to pull the plug when they are dissatisfied.

Asset managers must now pay much more than lip service to client service issues, a capability that is as rare as it is valuable. Proving their ability to manage risks will in future be an integral part of the trust-building that is now more vital than ever.

Strategic Implications For Asset Managers

There are significant strategic implications for asset managers as they look to position their business models for future success:

Implications for the market: The most attractive market segments in terms of future asset inflows will differ from region to region. Asset growth in specialties and in exchange-traded funds will be strong in Europe, whereas pension funds will lead the line in Asia.

Implications regarding players: The trend toward specialization along the value chain will continue, as this approach holds out potential to add more value. Independent financial advisors (IFAs) will play an increasing role in asset management distribution. More generally, asset managers will have to adopt a clearer positioning in the value chain.

Implications for the demand side: In the retail business, values-based client segmentation will lead to more actionable insights than a pure wealth-based approach. In the institutional business, greater professionalism will drive more outsourced portfolio management and underscore the importance of risk management.

Implications regarding offerings: Asset managers will have to diversify to protect assets across multiple classes as core/satellite investment approaches require the combination of multiple strategies. Focusing on core capabilities will be decisive.

Asset managers must focus on their specific strengths in five dimensions: financial market intelligence, products and pricing, distribution, branding and operations. At the same time, based on the strategy they choose, they must systematically come up with excellent answers to clients questions.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance
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