Rebooting the global asset management industry

Rebooting the global asset management industry 45 Systems thinking comes into the investment process via a five-step exercise. The first is preparing for alternative futures and deploying multiple strategies. Second is creating reference narratives or investment thesis to guide investment decisions. Third is allocating time and resources to model events that may or may not ever come to pass. Fourth is building cross-disciplinary teams that are better able to spot underlying vulnerabilities and respond in a timely fashion. Fifth is having a debating culture in which ideas generate new ideas and opinions shift as new evidence emerges. After all, in the dark, all swans could be black. The small and medium-sized asset managers in our survey have paid most attention to upgrading their investment capabilities so as to retain their relevance in a landscape that is being reshaped by passive investing. This is being done as part of a concerted effort into attracting, retaining and growing their client base: the other two areas receiving attention are client service and technology, as shown in the previous subsection. Their main aim is to retain their independent status. Yet, other businesses haven’t ruled out the option of being bought out by a large asset manager that is running a multi-boutique model. In it, current owners of boutiques retain equity in their business to realize greater proceeds in the future by continuing to operate the investment engine, but share distribution and back office activities with the mother ship to benefit from value creation through post-acquisition synergies. This has been increasingly happening in recent years, as large public market asset managers have been acquiring specialist private market boutiques of varying sizes. Hence, the choice for small andmedium-sized asset managers is either to remain independent by bootstrapping their way to global prominence or be autonomous units within larger asset houses. Systems thinking comes into the investment process via a five-step exercise. Insights It’s time for radical thinking as fat-tail events become less rare In this century, capital markets have become increasingly disconnected from the real economy. First, investment returns became a monetary phenomenon, with quantitative easing by central banks since 2009. But as central banks started to withdraw support in 2021, geopolitical risks have taken over. Extreme market ructions felt in early April 2025 after the U.S. announced reciprocal tariffs is a case in point . These proposals were well telegraphed in advance. Yet, markets reacted only when they were implemented. Once again, the event shows that the art of investing has to go beyond financial theories and develop new insights into how to make money when politics more than economics drives the markets. Investors are braced for more market moving risk-on/risk-off events for the foreseeable future, making value traps and value opportunities hard to distinguish. In response, we have been developing capabilities that aim to distinguish an event that causes periodic volatility from one that is a game changer. This is being done by beefing up our investment process with additional new lenses that look at markets from perspectives as diverse as politics, psychology and philosophy, with support from GenAI. In the process, we use systems thinking. Our innovations have two aims. First, to improve the old via a more competitive fee structure, better risk–return trade-offs and better liquidity of our funds. Second, to create new products like low-carbon strategies, multi-asset class funds and risk factor products. Together, these innovations have shielded us from the severe headwinds resulting from the rise of passive funds. A Danish asset manager “Markets worry about the sharks nearest to the boat and ignore geopolitical risks until they happen.” “The multi-boutique model is back, as large asset managers acquire specialist skills to enhance their product line-up.” Interview Quotes