The Covid-19 pandemic has had a huge impact on the asset management industry over the past two years and has fundamentally changed the way the industry operates. As the coronavirus struck, asset managers were forced to review their operating models and reassess how they use and prioritize their resources and personnel. As a result, asset managers have increasingly turned to technology, adapting to increased remote working and an acceleration in the use of digital services.
In many cases, the pandemic acted as a catalyst, accelerating trends that were already emerging before Covid-19 spread to the US. In some circumstances, completely new ways of working and doing business emerged overnight.
“Pre-pandemic, asset managers were facing a number of market and competitive pressures – fee compression, demand for lower-cost products, customized investment solutions, and the emergence of ESG. These challenges didn’t go away with the pandemic.
says Jeffrey Zoller, Director, US Fund Services at BNP Paribas.
“Instead, firms were forced to figure out how to deal with these challenges, while quickly adapting to a remote working model as lockdowns occurred.”
In particular, asset managers had to consider how they make the best use of talent, increase collaboration across functions, and accelerate decision-making, while adapting to changing workforce and customer dynamics.
The switch to remote working has been one of the most significant changes to operating models, one that is likely to remain in the post-pandemic operating environment, as staff embrace more flexible working conditions.
In a survey of 267 asset managers carried out by Ignites* on behalf of BNP Paribas, the vast majority of firms indicated that they have made a material change to their operating model within the past two years, including, significant technology upgrades, reduced office space/headcount and increased outsourcing. In contrast, just 11% of respondents say their firms made no significant changes.
Outsourcing Makeover: Revaluating as a Result of the Pandemic
Roughly one-third of respondents say they outsourced more during the past two years. A further 39% streamlined their key service providers, using fewer firms, but across more functions.
As asset managers evaluate how they can simplify their operating model, with a greater focus on allocating strategic resources to core competencies and value-add processes, a wider range of functions are now being considered for outsourcing. The survey indicates that the types of functions that asset managers wish to outsource differ by size and level of sophistication.
Larger asset managers want outsourcing partners to help them achieve broader strategic goals, such as new product development and front-to-back system and data integration. Smaller firms, meanwhile, view outsourcing as a means to make their operations more efficient and cost-effective.
Data management, for example, is an area that continues to grow in importance in the day-to-day functioning of asset management firms, but it is an area that is consuming more and more resources, making it an ideal candidate for outsourcing in some form.
“Prior to the pandemic, firms used data strategies as a way to build a competitive advantage in the market,” says Zoller. “But, during the pandemic, asset managers had to shift and also look at how to use data more effectively internally for better and faster decision-making in order to help them quickly adapt to changes in client demands and behaviors.”
The Importance of a Strong Relationship
“Asset managers want to maximize their investment, whether it be on the service side, technology or infrastructure: they really need optimization in order to be innovative,”
says Jeffrey Baccash, head of global ETF solutions at BNP Paribas.
That’s why asset managers need to build strong relationships with their service providers so that the providers understand their needs and adapt with them as markets and the economic environment change.
“The pandemic certainly forced firms to react and look at the operating model of the future,” adds Zoller. “Firms are trying to be more agile and have a more nimble operating structure so that they can insulate against future issues that we might not be able to anticipate.”
*Ignites, a Financial Times service, in partnership with BNP Paribas, conducted a survey in Dec 2021 of readers who are involved in operations, work with key service providers or oversee those who do to participate. 267 valid responses were received to show this snapshot of how the industry has changed.
