Righting the ship has been saved
Righting the ship
Transforming active equity for a competitive world
Deep secular shifts in capital markets and asset management’s operating environment are reshaping investment opportunities. How can asset managers improve their economics despite secular headwinds industrywide?
Explore active investment strategies
Active asset managers focused on long-only portfolios of quoted securities, particularly equities, have been the asset management industry’s bedrock for decades. Yet changes in capital markets, alongside asset management’s operating environment, are transforming investment opportunities.
Asset managers who realize the challenges with active equity management are secular, not cyclical—and therefore require proactive modernization—stand to gain from this unfolding dislocation. By leveraging consistently outperforming active equity strategies to shoulder out rivals while simultaneously and proactively rehabilitating weaker offers, asset managers can still improve their finances.
Our white paper’s four main conclusions outline this transformation:
- Cyclical and structural trends are reducing the number of active investment strategies with consistent outperformance, requiring new skills, information, and methods to deliver alpha.
- Demand for long-only actively managed equities will weaken, slowing overall revenue growth, and strengthening winner-take-all competition for remaining assets.
- As most asset managers maintain product ranges with both outperforming and outmoded strategies, many will likely benefit from objectively addressing their active equity capabilities.
- Thoughtful change management programs can strengthen weaker active equity offers by enhancing them, delivering them more cost-effectively, or taking more dramatic action.
- While the recent COVID crisis creates market uncertainty, the long-term implications for active management do not change. Active managers who transform their equity platforms will likely be positioned to retain assets, win-back investors into active strategies, and capture growth in a volatile market.
We invite you to read the report and learn more about:
- The current state of active performance and the secular shifts that are transforming the state of active management.
- The financial implications for outperformers and laggards among active managers.
- The assessment approach and plan of attack to transform challenged active strategies.
- Strategies for enhancing investment processes, such as activism, cross-capital structure investing, and new data and synthesis methods.
Embracing active investment management innovation
Transforming less competitive active investment strategies, particularly those focused on long-only listed equities, requires tough decisions and significant change. During the next decade, the role of the chief investment officer (CIO) will continue to evolve. While CIOs still will play a key role in overseeing investment philosophy and process, increasingly they will need to make the crucial business decisions required to make an asset manager’s product array more competitive for the long term. CIOs adept at talent management, comfortable with technology, strategic in their view of capabilities, and able to affect difficult change will provide their asset management firms with significant competitive advantage.
The death of active management—in particular, fundamental, long-only, listed equity strategies—truly has been greatly exaggerated. But innovation is sorely needed. As the small number of consistent outperformers squeeze the rest of the industry, asset management firms need to think creatively and strategically about the product shelf they seek to bring to market and not hesitate to carefully and thoughtfully reshape, or even exit, investment strategies that have become outmoded and uncompetitive. Asset managers with the right mix of high-quality strategies coupled with well-managed legacy product will have no trouble competing effectively in a less forgiving operating environment.