Asset Management for the Year 2022 – Which 10 developments will have the most significant impact on the asset management business in 2022?

1. The threat of inflation is always there

Inflation is thought to be here to stay for varying amounts of time, but as it continues to climb, asset managers need to come up with innovative strategies to insulate themselves from its harshest effects. Already, previously unpopular investment methods, asset classes, and geographical areas have begun to make a comeback in recent months.
Many investors have said that they anticipate decreasing their exposure to traditional fixed income assets as a result of the widespread expectation that inflation would continue to rise prior to the end of the year. However, investors are not completely turned off by fixed income since structured credit is becoming a more attractive proposition. This is the case notwithstanding the difficulties associated with liquidity and valuation.

2. Creating a standard format for ESG reports and disclosures

The number of people interested in investing in ESG funds has skyrocketed over the past several years, and there are no indications that this trend will change in 2022. But the rise in incoming funds isn’t the only thing that’s been on the rise. There has been an increase in the amount of pressure placed on asset managers to offer more data and consistent reporting in relation to ESG investments as a result of lawmakers turning their focus to ESG concerns. In addition to the ongoing implementation of the SFDR law, EU taxonomy and MiFID II sustainability preferences have been added to the rising stack of environmental, social, and governance rules that asset managers are required to comply with.

3. The deluge of new regulations

In the year 2022, the amount of work required to comply with regulations will only increase. Following closely on the heels of the European Securities and Markets Authority’s guidelines on liquidity stress testing, which will be implemented in September 2020, UCITS funds are currently in the process of preparing for the switch to PRIIPS KIDs for retail investors, which will begin in 2023. In addition, the rollout of ESG regulation is still in progress. According to the standards, fund managers are required to perform stress tests on the assets and liabilities of their funds. Additionally, fund managers are required to stress test future redemption requests in order to mitigate the risk of liquidity. In light of the fact that these obligations come on top of the extensive reporting requirements that are already in place for UCITS, AIFMD, MiFID, DTCC reconciliation under EMIR, Solvency II, ANNEX IV, OPERA, etc., asset managers are being forced to spend more time than they ever have before on regulatory compliance.

4. Considering Alternative Data Strategies

Asset managers are reevaluating their data strategies in order to improve the quality of the data that is used for portfolio analysis, as well as reporting to clients and regulators, as businesses strive to find operational efficiencies. This comes at a time when businesses are looking for ways to cut costs and streamline operations.

The ability of asset managers to comply with their regulatory reporting duties is becoming increasingly dependent on their capacity to integrate and aggregate data across a variety of different systems. Legacy systems are having difficulty processing the volumes of data necessary as a result of the burden of integrating new ESG measures into portfolio analysis and reporting. This is something that many people are finding out.

Because of the underperformance that certain managers are experiencing as a result of the present market conditions, it is more vital than ever to provide this information in an accurate and prompt manner. Data is the fuel that drives comprehensive performance and risk reporting. The ability to quickly consolidate and aggregate data across several systems can assist managers in acquiring a comprehensive picture of exposures and risk, as well as identifying the performance drivers and detractors that exist within a portfolio.

5. Providing a platform for digital reportage and analysis

An amazing reporting experience can go a long way toward establishing loyal customers and attracting new mandates in an industry where competition for capital is increasing at an ever-increasing rate. Investors are increasingly leaning toward managers who are able to deliver a digital reporting experience. This not only gives investors a near real-time picture of top-level performance and risk metrics, but it also gives them the option to look granularly at the individual security level. It is simply no longer sufficient for asset managers seeking to differentiate their service offering to provide solely static reports on a periodic basis.

6. An increased emphasis on the potential dangers

When markets are volatile, investor demands about risk management grow more in-depth and comprehensive. It is absolutely necessary to have robust systems and high-quality risk reporting. The capability to give a diverse set of analytics, such as portfolio sensitivities, scenarios, stress testing, risk contributions, and liquidity, in addition to performance contribution and attribution analysis, is also very important. It is absolutely necessary, in order to keep the integrity of the fund intact, to have robust risk governance frameworks in place, which include daily automated monitoring of regulatory and fund risk profile restrictions, as well as alerts to warn management of any violations.

7. The significance of providing accurate and complete reports

Especially in situations where performance has been lacking, maintaining investor confidence through transparent reporting is a critical component of the process. Allocators have non-investment teams in addition to their investment teams. These non-investment teams place a high importance on providing excellent client service and will have a substantial voice in deciding whether or not to redeem from a manager. Investors will need confidence that any underperformance is transient, particularly with methods that are volatile and require a complete cycle to deliver results. This is especially important when discussing strategies that take a full cycle to deliver results. It is essential for them to have the assurance that they are not being deceived and that nothing is being concealed from them. Reporting that is both open and simple to comprehend goes a long way toward satisfying that need for assurance.

8. The squeeze on fees continues

As a result of investors’ continued preference for funds with lower management costs, active managers are finding themselves under increasing financial pressure to raise their fees. Even if returns have been better in recent years, the industry is still cutting its fees in response to the increased pressure from investors for even greater concessions. It has increased the pressure on asset managers to safeguard their margins by discovering operational efficiencies through the use of technological platforms and differentiating their service through excellent reporting.

9. Concerns regarding online safety

One of the primary worries that prevented asset managers from using cloud-based software was related to the safety of their data. However, since the possibility of a cyberattack is greater than it has ever been, the data of asset managers is more safer stored in the cloud than it is on a server located within the company itself.

Cloud-based solutions apply security measures that are beyond the budget of most expanding asset managers, which is important considering that emerging businesses frequently have limited resources. Protecting user data typically involves the utilization of sophisticated detection systems, as well as robust authentication and encryption strategies. Continual security is ensured by the quantity of investment and specialized experience that suppliers can commit to monitoring the infrastructure and responding to new threats as they emerge, while fail-safe business continuity methods maximize the amount of time that the system is available to users.

10. The transition to using cloud-based services

Asset managers need to be able to adapt quickly in an environment characterized by fluctuating markets and cutthroat competition. Smaller and more nascent asset managers have the option to simplify cumbersome data administration and reporting operations thanks to cloud-based investment management software, which also offers customers a significantly enhanced reporting experience.

Employees are also freed from low value, arduous chores such as manual data gathering and reporting when automation is implemented. This frees them up to concentrate on higher value portfolio management and company development initiatives.

There has never been a time when data and digital change were more crucial for asset managers. Not only to reduce operating expenses and discover ways to improve efficiencies, but also to accelerate growth and bring in additional funding.