Only the adaptable thrives in the new landscape of asset managers

When Asia-Pacific leaders of many of the world’s top financial services companies gathered behind closed doors in Hong Kong a few weeks ago, the discussion centred on how our industry must change to meet the needs of millions of investors seeking a healthy financial future.

Global political instability and economic changes, driven in part by technology and innovation, are fostering uncertainty in financial markets. This has caused a rethink on how investors can seek to generate adequate returns and sufficient long-term savings.

Globally, in excess of US$50 trillion in cash is currently sitting on the investment sidelines as people try to make sense of new risk and return dynamics. Against this backdrop, it is the asset management industry’s responsibility to educate, digitise and innovate.

We must engage with our clients, counterparties and end-investors proactively around new technologies that will identify new sources of return, help in constructing improved portfolio solutions and evaluate risk across a broader array of both public and private asset classes. Those unwilling to adapt risk disruption, or worse, irrelevance.

This imperative is ushering in a new dialogue with clients who are looking to solve specific financial needs. They want bespoke outcomes that can be delivered through diverse investment platforms based on the right combination of investment strategy and investment building blocks. It has spawned innovations that provide new uses for market data and the evolution of artificial intelligence to expedite information processing and offer new insights that can underpin investment decisions.

Historically, asset managers have distinguished between active versus passive investment strategies. Now, these two strategies sit within the same portfolio. Passive investing has become yet another building block in creating cost-efficient, risk-adjusted portfolios.

Today, all investment decisions are active investment decisions. This is evidenced in the dramatic move to exchange-traded funds and efficient exposures that are being utilised alongside alternative asset class and private assets.