Shifting Dynamics for Institutional Asset Managers

January 30, 2024
Read Time: 6 minutes
Macroeconomic Environment

How technology trends are reshaping the institutional asset management landscape

The 2023 financial markets witnessed global macroeconomic challenges beyond the control of many institutional asset managers. Volatility took center stage with concerns ranging from inflation and interest rates to the complexities of geopolitics and the global economy. Institutional asset managers also found their firms grappling with renewed scrutiny on ESG-focused investing, increasing regulatory demands, and demands to diversify their mix of private asset classes in their portfolios.

If uncertainty marred 2023, investors have reasons for optimism in the year ahead. Inflation was at 6.4% at the start of 2023 and fell to 3.5% by year-end.[1] Some concerns, such as geopolitics, remain at heightened levels. Still, investors are becoming increasingly confident that the global economy will experience a soft landing and avoid long-held fears of a recession.

What trends are institutional asset managers seeing in the year ahead?

Adaptability will be key following a year marked by unprecedented volatility. Firms equipped to nimbly adjust their strategies and operations will be positioned to navigate the uncertainties inevitable in any business. For asset managers ready to transform their organizations, institutions must be prepared to embrace experimentation and change.

As we examine the drivers shaping the year ahead for asset managers, we’re intrigued by four key trends:

  • Unified platforms to manage public and private assets
  • Modernizing data platforms and data strategy for business agility
  • GenAI to improve investment operations and generate alpha
  • Cloud migration and platform consolidation

Effectively managing public and private assets through unified platforms

Companies that have traditionally specialized in one type of asset are expanding their reach into different categories, resulting in a convergence of asset classes.

As the lines between public and private assets continue to blur, a more unified approach to asset management is a must. A shared data platform to unify data and operations across investment strategies will empower firms to aggregate holdings, performance, cash flows, risk analytics, and reporting. In this operating model, managers can still maintain separate front-o­ffice systems to support unique end-market demands. What changes is the ability to manage data from one cohesive system.

Platforms that enable firms to manage their public and private assets seamlessly enhance efficiency and create a holistic view of a firm’s entire portfolio.

RELATED READING: Managing the Impact of Asset Class Convergence

Modernizing data platforms for business agility

In the age of data-driven decision-making, modernizing data platforms creates agility for firms to quickly pivot as market forecasts change, new investment opportunities arise or fall from favor, or a revolutionary technology enters our everyday vocabulary.

For firms ready to transform their organization, evolving their data strategies is critical to enhance business agility. This includes adopting advanced analytics and integrating real-time data to make informed and timely decisions. Modern data platforms give asset managers greater insight and precision to navigate market uncertainties with greater insight and precision.

Case study: Transforming enterprise data management

Market challenge

Recent estimates suggest that nearly four in ten institutional asset managers rely on enterprise data management systems no longer suitable for their needs.[2] Firms must be ready to venture into new asset classes, support the launch of innovative investment products, and ensure comprehensive reporting and data management. Robust data connectivity, advanced data transformation capabilities, and access to powerful data governance tools are key factors for firms ready to embrace a new way forward.

Arcesium solutions

By partnering with Arcesium, institutions can leverage ready-to-use connectivity with data vendors and external platforms, gain powerful data mastering capabilities, and leverage self-service tools. Arcesium’s robust API surface for custom integration and scalable cloud-native delivery model minimizes the total cost of ownership of an enterprise data management solution.

Market benefits

Modern data platforms present an attractive alternative for asset managers grappling with the challenges of legacy re-platforming. Cloud-native and SaaS-based data platforms offer enhanced enterprise data management capabilities, enabling firms to expedite implementation time frames and optimize costs through consumption-based pricing.

READ THE FULL CASE STUDY: Transforming Enterprise Data Management

Leveraging AI and machine learning for improved investment operations

Intrigue around AI dominated headlines and conversations in 2023. So it’s only natural for asset managers to consider how they can incorporate advanced tools into their operational processes. In a survey of Fortune 1000 and leading global organizations, 60% of respondents reported they are in the early experimentation and testing stages for GenAI. A far smaller number of respondents said they have a product in production. It will be interesting to see which firms begin to roll out the models and how those GenAI tools support their business.

GenAI holds the promise to revolutionize investment decision-making, risk management, and alpha generation. Adoption will almost certainly grow in 2024. Asset managers prudently leveraging GenAI can gain a competitive edge by making data-driven decisions that outpace traditional methods.

But GenAI won’t be a silver bullet. It will require significant upfront and ongoing investment, continuous technical enhancements, talent to refine the tools, and high-quality, fresh data.

As my colleague recently wrote, ”The right foundation and framework can enable firms to confidently navigate the world of generative AI, opening up new opportunities and driving innovation.”

It starts with purpose-built tools that seamlessly integrate data quality, governance, and lineage into their design. Focusing on core essentials such as data and governance can instill confidence that asset managers are constructing their models on a solid foundation. By meshing data quality and data governance, firms can enhance trust in the tool’s accuracy and output.

YOU MAY ALSO LIKE: Are the Robots Really Coming for My Job?

Cloud migration and platform consolidation

While there are multiple trends in the institutional asset management industry in the year ahead, the last one I’ll highlight is the shift toward cloud migration and platform consolidation.

Cloud computing offers scalability, flexibility, and cost-efficiency, making it an attractive option for asset managers. This strategic move to the cloud is designed to lower total cost of ownership, and also helps streamline operations, reduce complexity, and enhance overall efficiency. In 2024, we anticipate ongoing uptake in cloud adoption as financial firms recognize its transformative potential. The scalability of cloud-based tools is essential as firms increasingly operate in hybrid environments, require computational power to bring on new technologies, and invest in new opportunities.

Cloud-native SaaS platforms that address asset managers’ complex needs offer a unified approach to automate the investment lifecycle. With opportunities to lower total cost of ownership, scale business, and improve agility, asset managers can streamline their operations and adapt to the changing landscape.

I recently discussed this opportunity for institutional asset managers with Foxon Media Digital. For firms that say transforming their data platform transformation is a top business priority, migrating to the cloud and consolidating platforms with one unified system will prepare asset management for a new era of efficiency and innovation.

How can firms overcome legacy data challenges?

A look at the year ahead

As the financial industry struggles with the complexities of 2023, the year ahead is poised to be one of transformation and adaptation. Firms that embrace experimentation and change, manage public and private assets effectively, modernize their data platforms, leverage GenAI, and start migrating to the cloud will position themselves for success in an unpredictable market.

Navigating the ecosystem requires a proactive approach. Resilience, innovation, and the sector’s willingness to embrace change are set to shape a new era of possibilities.

Mahesh Narayan
Mahesh is Arcesium’s Institutional Asset Management Segment Head. In this role, Mahesh oversees Arcesium’s capabilities for institutional asset managers, including the Aquata Data Platform, middle- to back-office solutions, and associated financial operations. Follow him on LinkedIn.

[1] Monthly 12-month inflation rate in the United States, Statista, January 15, 2024
[2] 2022 Global Investment Operations Priorities, InvestOps

Share This Post

Mahesh Narayan
Mahesh NarayanInstitutional Asset Management Segment Head

Mahesh oversees Arcesium’s capabilities for institutional asset managers, including the Arcesium Data Platform, middle- to back-office solutions, and associated financial operations.

Previously, he was the commercial director of BlackRock’s Aladdin Data Cloud, the data warehouse platform, supporting large global asset managers and asset owners in their data strategy, data analytics, and data re-platforming needs.

Before BlackRock, Mahesh was Global Head of Portfolio Management and Research at Refinitiv, responsible for Refinitiv’s buy-side data, workflow, and analytics solutions to a diverse set of financial institutions across the Americas, EMEA, and Asia Pacific. Earlier in his career, Mahesh worked for various hedge funds, including S.A.C. Capital and Calypso Capital Management, and as a consultant with McKinsey & Company.

Education & Credentials

  • MBA, NYU Stern School of Business
  • BS/BTech in Engineering, IIIT Mumbai

Subscribe Today

No spam. Just the latest releases and tips, interesting articles, and exclusive interviews in your inbox every week.