Technological developments within the evolving asset management industry (Review Report)

Following improved financial market conditions, asset management firms find themselves at a delicate stage as they attempt to cope with the changing regulatory and competitive landscape. Industry consolidation has highlighted the need for not only operational structures to be enhanced through the use of technological solutions but also platforms to shift focus to the most profitable products.

Report Highlights

IT spend with a focus on the retail client base across the buy side is expected to rise over the coming years as retail investors especially across North America, Europe and Asia Pacific (including Japan) become increasingly wealthier. Japanese households are beginning to allocate assets to investment type products, heralding a paradigm shift in their attitude towards investing. Datamonitor expects this spend to rise from $38M in 2007 to $68M by 2012 (retail asset management technology spend only).
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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Introduction 2
The evolution of the asset management industry (Market Focus) 2
Strategies to cope with a changing asset management landscape (Strategy Focus) 2
The role and future of technology within asset management (Technology Focus) 2
Asset management technology expenditure by front office function (Databook) 3
Asset management technology expenditure by client base (Databook) 3
Table of Contents 4
the evolution of the asset management industry (Market Focus) 5
SUMMARY 5
Analysis 5
Introduction 5
The asset management processing chain 5
The demand for superior fund performance is driving strategic changes to organizational business models 7
Investment strategies will become increasingly polarised across asset classes 7
Competitive and demographic changes are leading to structural change 8
An increased drive to harmonize compliance rules globally is expected as the industry develops 9
Specific asset management regulations differ across the globe 9
Hedge fund regulation aims to make the sector more mainstream 11
Open architecture remains the key to changing the balance of power within distribution 12
Retail asset management 12
Institutional asset management 13
Conclusion 13
strategies to cope with a changing asset management landscape (Strategy Focus) 14
SUMMARY 14
Analysis 14
Introduction 14
The drive to enhanced performance is pushing the rise of new product segments 14
Asset allocation techniques rising in importance to provide platform for alpha growth 14
New products target diversification and uncorrelated returns 16
Emerging markets provide another route to profitability 17
Outsourcing trends are growing in popularity in a bid to achieve efficiency gains 18
Emphasis continues to be placed on the placement and charging of investment products 20
Transparency is placed high on the agenda 20
Distribution via wraps are on the rise 21
Conclusion 21
The role and future of technology within asset management (technology Focus) 22
SUMMARY 22
Analysis 22
The drive to offer superior performance is changing risk procedures in both the front and middle office 22
Risk control is proving essential to meet the growing needs of investment managers 22
Operational risk is identified as a key to profitability 23
Outsourcing fund marketing functions is growing in popularity for asset management firms to maintain efficiency 25
Vendor opportunity exists in flexible, customizable solutions 26
Online issuance is developing as an effective distribution channel although several models exist 27
Fund supermarkets 27
Fund supermarkets and IFAs 27
Wraps 28
Online stockbrokerages 28
Banks and IFAs 28
Conclusion 28
Asset management technology expenditure by front office function (databook) 30
Introduction 30
North American asset management technology expenditure by front office function ($m) 30
European asset management technology expenditure by front office function ($m) 31
Japanese asset management technology expenditure by front office function ($m) 32
asset management technology expenditure by client base (databook) 33
Introduction 33
North American asset management technology expenditure by client base 33
European asset management technology expenditure by client base 34
Japanese asset management technology expenditure by client base 35
APPENDIX 36
Methodology 36
Definitions 36
UCITS III 36
Alpha 36
VaR 36
Further reading 36
Ask the analyst 36
Datamonitor consulting 36
Disclaimer 37
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Table 1: North American asset management technology expenditure by front office function ($m) 30
Table 2: European asset management technology expenditure by front office function ($m) 31
Table 3: Japanese asset management technology expenditure by front office function ($m) 32
Table 4: North American asset management technology expenditure by client base ($m) 33
Table 5: European asset management technology expenditure by client base ($m) 34
Table 6: Japanese asset management technology expenditure by client base ($m) 35


Figure 1: The asset management processing chain 6
Figure 2: Operational requirements for SOX compliance continue to affect asset managers 9
Figure 3: Strategies differ for firms across the investment spectrum 15
Figure 4: Operational efficiency is the major driver behind back-office change 19
Figure 5: Asset managers are undertaking strong initiatives to handle operational risk 24
Figure 6: Successful firms will move from a reactive to a proactive approach to risk management 25
Figure 7: North American asset management technology expenditure by front office function ($m) 30
Figure 8: European asset management technology expenditure by front office function ($m) 31
Figure 9: Japanese asset management technology expenditure by front office function ($m) 32
Figure 10: North American asset management technology expenditure by client base ($m) 33
Figure 11: European asset management technology expenditure by client base ($m) 34
Figure 12: Japanese asset management technology expenditure by client base ($m) 35
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