Rebooting the global asset management industry

Rebooting the global asset management industry 31 Key Findings a. AI and GenAI They will have a disruptive impact in five activities in the value chain among at least one in every two respondents: • investment management • back office operations • personalized client service • information technology • sales and marketing. Thus far, the emphasis is on augmenting these technologies with human intelligence to achieve the best of both worlds whilst compensating for one another’s weaknesses. b. Factors Constraining Adoption The constraining factors are inherent to these technologies and to organizations. The technology- related ones, reported by one in every two respondents are: • legacy systems not amenable to systems integration • lack of explainability and transparency • inadequate quality assurance around Big Data • data security and intellectual property infringement • inaccurate responses or ‘hallucinations’. The organization-related constraints reported by at least one in every three respondents include: • potential harm to client interest from untried and untested technologies • legacy thinking creating management inertia • focus on short-term profits at the expense of long-term planning. c. Back Office Outsourcing Of the 13 main back office activities, ten have been outsourced by one in every two asset managers. The top five are: • custody and settlement • OTC derivatives administration • valuation of illiquid assets • investors services (incl. proxy voting) • securities lending and cash management. d. Front and Middle Office Outsourcing Being core tobusiness brand, outsourcing of likely candidates has thus far been limited to four activities: • trading • research and analysis • IT infrastructure • trade support. Key Messages Our respondents are interested in AI and GenAI. But they want ready-made solutions, rather than experimental technology. AI and GenAI have transformative potential. What remains challenging is getting the adoption right. The progress so far is helping to open the door to the outsourcing of front and middle office activities, which are expected to be the next frontier of outsourcing. “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” Buckminster Fuller