ETF providers are the belle of the ball these days. Assets are pouring in as investors seek lower cost options for managing their money across a diverse set of investment options. In turn, this is putting real pressure on traditional active investment managers. The impact of this market shift is being felt across the industry as precious budget dollars are allocated to address the evolving technology demands needed to keep pace.
For ETF providers, the challenge is keeping up with the strains of such tremendous growth. Not exactly a bad problem to have, right? Things are moving fast and being first to market with new product offerings is key to attracting assets. Having tools in place to collect and synthesize data quickly and with confidence is an absolute necessity when analyzing product offerings tailored to evolving investor needs. In addition to investing in data collection and mining capabilities, firms must look at how to run their operations as efficiently as possible in this heavily cost-driven space. Without effective technology solutions in place, it is impossible to sustain the cost-effective efforts required to compete and thrive. While software vendors are racing to support various segments of the ETF management process, there is still much more needed in terms of technology solutions.
Meanwhile, traditional asset managers are feeling the heat as investors continue to withdraw assets at a pretty steady clip, chasing lower fees and higher net returns. With these outflows, the pressure is on for these managers to glean investment insights and to do so efficiently. This boils down to one key component: it’s all about the data! Successful active managers know this and aren’t afraid to put their money where their mouth is in terms of investing in data and technologies to help generate insights that will separate their performance from the pack. They must also continually work toward keeping operational costs low to compete as much as possible with their lower cost peers. Streamlining technology platforms and improving data management practices are common areas of focus for our client base—and rightfully so.
Many would argue that the investment industry may lag others in terms of technology adoption, but it is generally quick to react to trends that bring in assets. The success enjoyed by the ETF providers is not going unnoticed. Following the money flow provides a clear path for technologists to consider options in mapping out the best solutions to help firms respond to the new opportunities arising in this rapidly shifting market.
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