Investment Management Industry Bullish About Growth Opportunities
Compared with other industries, including banking and insurance, investment managers are bullish about growth opportunities according to KPMG’s Succeeding in a Changing World report.
Forty-eight per cent of the 105 CEOs and finance directors from EMEA investment management companies interviewed by KPMG, identified pursing growth through successful transactions as their number one priority. This is in contrast to other areas of financial services, including banking and insurance, where only 32% and 29% of respondents respectively, identified this as a priority.
Addressing risk through the organisation and changing business operations to realise cost efficiencies were named as the other top issues for investment managers.
Tom Brown, European head of investment management at KPMG, commented: “Things are looking up for the investment management industry. Players are moving off the life-support systems that kept them ticking over six months ago, and they have now entered a strong recovery phase. Growth is very much back on the CEO agenda and as banks and other financial institutions spin out their asset management businesses, investment managers are looking to snap up acquisitions as they come to market.”
But where will the growth come from? Only 18% believe Asia will save the European investment manager. Tom Brown continued: “The Asian market is not going to be the exclusive source of growth for all of the industry. However, I am convinced that the emerging markets are critical to investment managers’ growth agendas. Firms that are sufficiently bold and optimistic are pushing into Asia and Latin America. They are setting up in countries that are experiencing robust economic growth in order to capitalise on opportunities to direct regional wealth into new assets and funds.”
KPMG’s report also revealed that the overwhelming majority (81%) believe the industry should take a stronger lead in addressing regulatory issues, rather than waiting for the regulator to impose stringent rules of play.
Tom Brown commented: “Regulatory change remains a standing item on the agendas of CEOs and boards. The rush of regulation that has followed the financial crisis is now bedding in, and business leaders now tolerate this environment as the ‘new normal’.
However, there is still the risk of over-regulation and if the pendulum swings too far the net result will be stifled innovation, reduced investor choice and increased costs.
“The sector is complicated by multiple industry groups, trade associations and national bodies. With better organisation, and a degree of consolidation, such bodies would be better equipped to influence and streamline regulatory policy-making.”
Other key findings from the report include 77% believe financial advice to consumers across Europe needs to be improved; 61% expect spending on outsourcing will be higher than anticipated. Many expect they will have to pay their outsourcer to deliver the regulatory changes that are required. Ultimately these costs will be passed onto the consumer; 64% believe there will be greater polarisation in the industry as investors put more of their portfolios with top performing, active managers who deliver consistently strong results. The rest will be invested with lower-cost index trackers.