Synthetic intelligence (AI) was essentially the most raised concern up to now 12 months amongst asset supervisor respondents to the annual Index Business Affiliation (IIA) member survey. Sustainable investing, thematic investing, and customised funding, respectively, ranked as high of thoughts after AI amongst survey respondents.
Total, the outcomes illustrate that the asset administration trade in Europe and America is in transition, going through mounting ranges of complexity and a necessity for brand new partnerships, new and extra specialised data sources, new abilities, and stronger ecosystems and alliances.
Background
4 years in the past, IIA started publishing a survey in partnership with our member corporations and fielded with the assist of Opinium Analysis. Annually, we interact with 300 chief funding officers, portfolio managers, and chief monetary officers throughout a variety of funding suppliers in the US and Europe to gauge how asset managers view progress towards present challenges and alternatives, and the important thing components shaping the longer-term evolution of the trade.
After we began this endeavor in 2020, the aim was to verify index suppliers understood the longer term wants of asset managers when it comes to environmental, social, and governance (ESG)- and sustainable-related indexes.
Based mostly on our learnings during the last three years and suggestions from our IIA members, we determined to broaden the 2024 survey past ESG- and sustainable-related questions. ESG and sustainable investing in fact stay central and materials to international traders, however we wished to guarantee that our aperture was vast sufficient to seize the complete pallet of drivers and developments impacting our purchasers. I’m so glad we took this strategy as our findings revealed a a lot deeper set of challenges, alternatives, hopes, and issues. What is evident from this yr’s outcomes is that trade is going through rising complexities.
What Components Will Have Biggest Affect on Funding Efficiency?
We requested which components over the subsequent 12 months would have the best affect on funding efficiency. Over the subsequent yr, asset managers are extra keenly centered on macroeconomic points like rates of interest, inflation, and a possible financial slowdown than they’re elections and geopolitical occasions. Notably, 81% of US respondents prioritized rates of interest and inflation as an important points.
We requested managers what developments they’ve been excited about essentially the most over the past 12 months. I used to be stunned by the substantial variety of respondents who ranked AI as their most raised concern, overtaking sustainable investing. Different technological points like tokenization and blockchain had been solely raised by roughly 10% of managers. Managers centered on thematic funding and customised merchandise after sustainable investing. Solely about 25% recognized crypto merchandise as a subject they’re discussing with their colleagues — about the identical proportion as these excited about easy methods to convey non-public markets into their corporations’ choices.
Generative AI: A Sport Changer
One huge dividend from our determination to broaden the vary of matters on this yr’s survey is the insights we gained round AI, and what it means within the eyes of asset managers.
ESG Exuberance Tempers
We revisited ESG and sustainable investing on this yr’s survey to see if the torrid tempo of development cited in prior years was persevering with. What we discovered is that whereas ESG continues to be a vital a part of international asset managers’ technique, the excessive expectations for future development we noticed in prior years of the survey have tempered.
When considered over the four-year arc of the survey, survey respondent expectations for ESG portfolio implementation have come again to earth after the spike we noticed in 2022 and 2023, touchdown again down close to 2021 ranges. For us, this means not that ESG goes away, however slightly that it’s settling right into a extra sensible long-term development curve. As soon as once more, environmental components (the “E” in ESG) proceed to be most on the radar of traders in relation to sustainability.
Non-public Markets: A Puzzle to Remedy
Non-public markets proceed to be an space of alternative for international asset managers but additionally an space of problem, in keeping with our survey. Whereas asset managers just like the idea of personal markets for funding alternative and diversification, they cited a number of challenges in relation to implementation.
Issue integrating non-public fairness into their funding lineup, liquidity issues, and information gaps had been cited as top-of-mind points. This isn’t stunning given the traditionally sluggish tempo of the event of world indexes which seize non-public fairness market information and efficiency.
Index Suppliers in Demand
Whereas our survey identified a number of classes that characterize vital challenges for our purchasers, it was encouraging to see that asset managers’ high 4 areas to accomplice with index suppliers are for sustainable investing, direct indexing, thematic investing, and customised funding options. The survey reveals that greater than half of respondents imagine that index suppliers and the providers we provide will grow to be extra necessary to their success within the subsequent 12 months. Importantly, about 20% count on to make use of extra index suppliers within the subsequent 12 months.
It is a very high-level snapshot of our survey findings. I invite you to take a deeper dive into this yr’s outcomes. I welcome your suggestions and ideas for future analysis.
