According to a poll by SEI, 63% of investment managers surveyed are optimistic about their firm’s prospects over the next three years, and of those, 50% feel this way due to the strength of their brand. The poll was conducted at SEI’s Annual CFO Forum for Alternative Investment Managers in New York.
Survey respondents said they feel the institutional channel offers the greatest opportunity for asset growth (74%), specifically naming pension plans and foundations and endowments as the most attractive segment. Geopolitical and economic uncertainties were indicated by 63% as the most significant challenges facing the industry in the next 12 to 18 months. However, a majority of managers believe that investor confidence is better now than in the direct aftermath of the financial crisis, albeit only slightly.
Participating firms indicated that the top areas for investment in the next 18 months will be portfolio management (25%), or marketing and distribution (25%), while only 4% said they are planning to invest in investor reporting. Almost 80% of managers feel that the cost of adhering to new regulatory requirements will negatively affect their firm’s profitability, yet they were split 50% to 44% as to whether the volume and appropriateness of new regulations was about right or far too burdensome.
Panel discussions dealt with the continued evolution of the investment management industry, particularly the focus on corporate governance and a structured and responsible approach to outsourcing. Managers believe that addressing the industry’s continued institutionalization is mandatory to attract institutional investors, deal with investors’ increasing transparency needs, and remain a profitable business enterprise. Almost half (47%) of managers cited increasing efficiency as their greatest operational challenge, followed by their ability to reduce costs.
“Managers are looking to improve their scalability, increase their efficiency, and streamline internal processes,” said Ross Ellis, vice-president and head of the SEI Knowledge Partnership for SEI’s investment manager services division. “CFOs and COOs wear many hats, and through the increased use of technology and leveraging of third-party resources, they are better able to focus on what’s most important while keeping abreast of heightened regulatory requirements.”
Several panelists confirmed that while independent third-party administration was an expectation of institutional investors, outsourcing was also a means to positively create an institutional-quality infrastructure.
“Operational infrastructures can be bolstered, providing opportunities for enhanced transparency and internal controls that can improve client relationships and support growth,” said Ellis.