Our annual Outlook reflects on the transformative shifts in the asset management industry and anticipates the impact of emerging trends for the year ahead. Today the industry is navigating a paradox: emerging technologies have the potential to revolutionize our clients’ businesses, but realizing this potential requires an incremental evolution away from legacy systems.
Exploring the delicate balance between innovation and practicality, here are the key insights from Outlook 2024.
Many software and service providers are undergoing transformation in tandem with their clients. It’s critical for asset managers to assess their willingness to collaborate and their requirements for customisation.
Most asset managers are tackling longstanding data challenges around governance, quality, and integration while new tools emerge to support evolving data needs.
Advancements in AI and tokenisation have captured mindshare but asset managers will benefit from focusing on technology fundamentals now and staying abreast of developments that could impact them in the future.
If our industry is going to take advantage of innovation, there will need to be a concerted industry effort to rapidly develop those hybrid skillsets.
The solutions market leans on collaboration and partnership
Looking back at the past five years, themes like collaboration, front-to-back solutions, and the role of cloud in the vendor market continue to be relevant. The industry is evolving, with a better understanding of challenges and the need for tailored solutions. Collaboration between software vendors and service providers becomes crucial for delivering robust functional services.
The days of $500B asset managers receiving floppy disk software upgrades via mail evolved with the introduction of application and data layers over the course of the 90’s and early 2000’s. Today, the industry is experiencing a similar seismic shift as software vendors move to the cloud. Cloud evolution is crucial for business viability but despite initial strides, many software and service provider solutions remain underdeveloped, offering both challenges and opportunities for asset managers navigating transformation initiatives. It’s key for technology and operations leaders to be willing to make incremental change and work in tandem with software vendors as they modernize their offerings.
Though cloud enablement has been a key priority for asset managers and software providers over the past five years, the trend of front-to-back solutions also dominated mindshare. Once seen as an operational Shangri-la, single suite front-to-back solutions are now sharing the stage with other options. Over the past year, a collaborative approach between software vendors and service providers emerged as a dominant trend. This shift prioritizes flexibility and plug-and-play integration, enabling asset managers to tailor solutions to their specific needs. Critical to this strategy will be software vendors and service providers addressing concerns around data flow and integration—to date, the key pain point in complex implementations.
Evolving priorities demand data evolution
As the vendor market matures its technology offerings, asset managers face an intensified need to modernize their data strategies for optimal utilization of solution sets. This imperative extends beyond vendor relationships, requiring a strategic approach to the data ecosystem to empower business users, meet investment goals, adhere to regulations, and uncover new insights.
Over the past decade, a significant shift in data architectures has transpired, progressing from traditional data warehousing to the adoption of big data technologies and cloud solutions. The accelerated movement to the cloud in the 2020s has given rise to innovative concepts like data lakehouses—a hybrid architecture offering centralized storage and interactive analytics.
Simultaneously, the industry witnesses the emergence of data fabric—an architectural layer unifying data across systems and silos, catering to the growing demand for self-service data access. A data fabric is not one singular technology, but rather an ecosystem of tools, processes, and frameworks. One technology that folds into this ecosystem is a data mesh.
In a data mesh, a functional data product team is responsible for managing their own data, which by and large works to decentralize both data ownership and governance. These technologies address challenges such as governance, toolsets, data types, and storage, supporting the imperative to democratize data access. While still in early stages, the adoption of data meshes and data fabric in 2024 reflects a forward-looking approach among asset managers, recognizing the potential to enhance data access without compromising integrity.
Tech leaders must balance near-term with new advancements
In navigating current and future technological landscapes, asset managers are encouraged to focus on both immediate implementation and long-term transformative technologies. Trends span from technology to enable new alternative investment strategies to the pursuit of a client book of record (CBOR) to the mainstream rise of natural language processing (NLP) technology. The alternative investments surge prompts a shift from one-size-fits-all solutions to a best-of-breed strategy, emphasizing component-based systems and data quality. The pursuit of a CBOR, though complex, offers valuable insights for revenue growth in a fee-pressured environment. The mainstream adoption of NLP, illustrated by platforms like ChatGPT, holds promise for creative outputs in client communications and strategy shaping, with challenges in balancing data availability and security.
As for technology experimentation, disruptive innovations like AI, distributed ledger technology (DLT), and quantum computing all capture the industry's interest. While progress in quantum computing may be distant, robotic process automation (RPA) gains traction, with most service providers incorporating some level of automation into their client workflows. Distributed ledger technology, specifically asset tokenization, is forecasted to reach $16 trillion by 2030, prompting industry engagement and partnership exploration to understand its impact fully. Amid the experimentation, the imperative is clear: to walk before running, balancing present challenges with a keen eye on evolving destinations in the dynamic technology landscape.
The talent shortage challenges innovation
Talent acquisition and retention, a recurring focus in our annual outlooks, has become increasingly challenging in the quest for innovation. Despite industry-wide calls to "do more with less," a lack of skilled resources impedes progress, impacting project delivery, cost-cutting measures, and multi-year initiatives. Solving the talent shortage necessitates industry-wide efforts to develop hybrid skill sets aligning domain expertise with advanced technology proficiency for successful cloud-based solutions adoption. The industry's future outlook depends on addressing this talent gap, fostering a culture of innovation, and leveraging emerging technologies.
The year ahead
This year the anticipation of transformative changes driven by new technologies and data strategies is palpable. While vendors are incorporating innovative technologies into their roadmaps, the industry stands at a crossroads. The potential of available technologies is compelling, yet most operating models are not fully equipped to harness them. In advising clients on their plans for transformation, the emphasis on the underlying strategy involving people, process, and technology is crucial. Amid ongoing transformation initiatives, maintaining a core focus on the operating model becomes paramount. The challenge lies in balancing the aspiration for innovation with the pragmatic considerations of people, processes, and technology, serving as the linchpin for future success.