2020 Investment Management Outlook

Seeking growth in an increasingly dynamic and complex industry landscape, investment management firms may need to leave comfort zones behind to explore new or different avenues next year.

Key messages

• The pace of mergers and acquisitions (M&A) may pick up over the coming year as investment managers look beyond their core capabilities to achieve top-line growth and extend client service offerings.
• To expand into emerging customer segments, leading firms will likely try to resonate culturally with their new customers, deliver through current or newly developed technology, and meet the changing investment expectations, such as ESG (environmental, social, and governance) principles, of these new segments.
• Private equity (PE) firms have started adopting alternative data for sourcing deals and conducting due diligence, following hedge fund and long-only managers.
• Adopting and using insights from alternative data sets for managing and transforming portfolio companies can be a game changer for PE firms.
• In 2020, Deloitte expects leading investment management firms to cross the boundary from traditional cost-efficiency projects into a save-to-transform approach, increasing competitive advantage in the process.

The industry backdrop for investment managers has become increasingly complex. The mix of investments has changed dramatically over the past 10 years—passive funds are now accounting for the largest portion of the total US fund assets and private equity has also outperformed and grown assets steadily. These shifts coincide with an interesting global economic backdrop as the US economy continues its record expansion, major countries in Europe may already be in recession, and China’s growth slowdown is likely to continue.

In 2020, we think the cumulative effect of fee pressures, shift to passive funds, and higher concentration of assets could motivate investment managers to leave their comfort zones and cross boundaries by making dramatically different business decisions. The 2020 investment management outlook focuses on the strategic plans that can help investment managers succeed by:

• Finding profitable growth
• Creating operational efficiencies
• Improving customer experience and engagement