2018年-德勤中国_2019InvestmentManagementIndustryOutlook_24页_2mb

2019 Investment Management Outlook Summary

Core Content

The 2019 Investment Management Outlook highlights the evolving landscape of the industry, emphasizing the need for firms to navigate a complex environment marked by shifting investor preferences, regulatory changes, and technological advancements. The report identifies three core areas of focus: growth options, operational efficiencies, and customer experience. It suggests that firms must adapt strategically to remain competitive and achieve long-term success.

Main Points and Key Information

1. A Mix of Opportunity and Challenge

• The investment management industry is undergoing rapid transformation due to factors such as changing investor behavior, margin compression, regulatory developments, and technology.
• The long bull market has reduced the intensity of some challenges, but markets still operate in cycles.
• Firms that can effectively manage these challenges through strategic planning and execution are more likely to succeed.

2. Priorities for Growth

Passive Funds Continue to Grow

• Passive funds, especially ETFs, have been gaining significant market share. In 2018, 16 of the top 20 funds by net flows were passive.
• Zero-cost ETFs may accelerate this trend, with global ETF assets projected to reach $25 trillion by 2025.

Active Managers Face Pressure

• 86.7% of US active funds underperformed their benchmark over the 10-year period ending in 2017.
• Similar underperformance is seen in European funds, indicating the need for active managers to demonstrate consistent alpha generation.

Private Equity (PE) Performance

• PE firms have shown strong performance, leading to large capital inflows and record dry powder (undeployed capital).
• As of March 2018, global PE dry powder reached $1 trillion.

3. Customer Preferences Are Diverging

• Millennials and Gen Z prefer digital engagement, low minimum investments, and 24/7 access to investment advice.
• Gen X and Baby Boomers expect elegant digital interactions and professional advice.
• Institutional investors demand better transparency, tailored solutions, and global products.

4. Regulatory Fragmentation and Compliance

• Regulations in the US, Europe, and Asia are diverging, creating challenges for global firms.
• Regulatory changes are expected to complicate compliance in 2019, requiring firms to build regulatory-ready organizations.
• The Asia Region Funds Passport may facilitate cross-border fund distribution in the Asia-Pacific region.

5. Technology-Driven Disruption

• Tech-savvy firms are challenging traditional players by offering low-cost, digital-first services.
• Artificial Intelligence (AI) is becoming a key enabler in investment management, with applications in wealth advisory, portfolio customization, and customer service.
• Firms like Morgan Stanley and a leading investment manager are using AI and machine learning to enhance decision-making and provide tailored advice.

6. Pricing Models Evolve

• Passive funds are seeing a shift toward free or no-fee models, with revenue now focused on securities lending, order-flow payments, and shareholder-servicing fees.
• Active funds are exploring fulcrum fee models, where fees are tied to performance, offering a win-win for investors and managers.

7. Product Development Trends

• ESG (Environmental, Social, and Governance) investing is gaining traction, driven by social awareness, pension funds' long-term goals, and regulatory changes.
• Alternative data is being integrated by both PE and long-only funds to enhance investment decisions.

8. Market Expansion in Asia

• China is a key focus for global investment managers, with the potential to become the second-largest investment management market.
• Firms are entering China through local partnerships and joint ventures, such as UBS Asset Management with SDIC.
• Regulatory changes and cultural diversity present challenges, but also opportunities for long-term growth.

9. Operational Efficiency Strategies

• Cloud migration and advanced analytics are key tools for improving operational scalability and cost control.
• Firms like T. Rowe Price are investing in cloud technologies to reduce fixed costs and enhance decision-making.
• Natural Language Processing (NLP) and Machine Learning (ML) are being used to generate insights and manage risk.

10. Regulatory and Tax Considerations

• The US Tax Cuts and Jobs Act (2017 Tax Act) has influenced PE operations, including the carried interest provision and debt financing limitations.
• Firms may shift operations to states with more favorable tax laws to maintain the benefits of the carried interest.
• Brexit could lead to stricter regulations for the UK, prompting firms to consider relocation to EU financial centers like Dublin, Frankfurt, Luxembourg, and Paris.

11. Predictions for 2019

• Proprietary indexing will increase, allowing firms to lower expense ratios by up to 10 bps.
• Alternative data will become more widely used across both PE and long-only funds.
• Fulcrum fees for active funds are expected to gain traction, with over 10 firms likely to adopt this model in the next 12–18 months.

Key Actions for C-Suite

• Invest in data storage and analytics to enhance alpha generation and decision-making.
• Be aggressive in acquiring new capabilities through M&A and minority stakes.
• Adopt a "zoom out/zoom in" approach to technology investments, balancing long-term vision with short-term execution.
• Design compliance processes that align with new regulations, leveraging existing systems where possible.
• Build trust among stakeholders to facilitate the adoption of new technologies and processes.

Conclusion

The 2019 outlook for investment management underscores the importance of strategic adaptation in the face of a dynamic and challenging environment. Firms that focus on growth, efficiency, and customer experience, while leveraging technology and regulatory insights, are more likely to thrive in the coming year.