Australian asset managers have to develop solutions and reassess their business models as more institutional clients move their portfolio management in-house, says State Street.
According to a State Street report compiled by FT Remark – Opportunities for Optimism? A New Vision for Value in Asset Management – 71 per cent of the 400 asset managers surveyed said this trend is impinging on their current business model.
State Street said that asset managers have to respond to new challenges with product innovation and offer better services and value to their clients.
State Street Global Services head, Australia and New Zealand, Paul Khoury said: “Growing client demand for bespoke solutions requires many asset managers to adjust their business models, particularly as clients move in-house and insist on more personalised service to help them manage their money.”
The report found that 78 per cent of asset managers said a greater proportion of client assets will move to bespoke solutions over the next five years.
“The most enterprising asset managers are responding by bringing more to the table in their client relationships.
“Delivering greater value doesn’t just mean achieving consistently high returns, it means forging closer partnerships with investors based on a transparent dialogue around risk and performance,” Mr Khoury said.
“Competition is also intensifying – not only from traditional rivals but from potential tech-savvy challengers too,” the report said.
Approximately 82 per cent of the asset managers surveyed indicated that they are likely to face direct competition from an industry disruptor in the next five years.
“Non-traditional market entrants could mount a serious challenge to asset managers in the region and globally,” Mr Khoury said.
Nonetheless, 88 per cent of asset managers predict a positive outlook for profitable growth.
According to the report, the “race is now on to capture new sources of growth”.