By most accounts, the flurry of M&A activity in the asset management world shows no signs of abating. Banks, insurers and asset management enterprises are vying for deals that will enable them to multiply AUM, gain scale, expand distribution and diversify their offerings.
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Most asset managers would agree that high-performance technology infrastructure is essential for optimizing efficiency, controlling operating costs and moving a business forward. In today’s complex, fast-paced marketplace, it is also a competitive necessity—potentially a big differentiator in enabling firms to operate efficiently across the investment management ecosystem and deliver a friction-free client experience. In its recent report on “The Future of Asset Management,” consulting firm Accenture said, “The asset management landscape seems to be evolving faster than firms’ ability to operationally adapt, putting pressure on firms to implement flexible, scalable operations and technology.”
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Mark-to-market pricing of financial instruments plays an important role in managing risk. Asset managers and other industry practitioners depend on accurate valuations of financial instruments to assess the impact of risk factor changes on their portfolios. But the ability to accurately calculate exposures is challenged by highly dynamic, frequently fluctuating markets. Market standard valuation techniques such as Monte Carlo aren’t always efficient for such assets. Certain derivative instruments, such as Asian spread options, are a case in point. These instruments require a more robust valuation approach.
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When it comes to the distribution (sales and marketing) of investment products, the variability of product value, changing market conditions and economic outlooks, evolving consumer preferences and behaviors, and technological advancements make the future uncertain. But if there is one certainty in our world, it is that the future distribution landscape will look quite different from the distribution landscape of the past.
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The first half of 2021 saw several significant mergers and acquisitions in asset and wealth management, and the activity shows no signs of slowing. According to a recent PwC 2021 Midyear Outlook report, there were 145 transactions in the space in the first six months of the year. PwC anticipates the trend will continue amid ongoing diversification, innovation and transformation trends. SS&C recently sat down with several of our clients to discuss what M&A means for operations—and how technology providers can help their clients succeed.
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In September 2019, the Securities and Exchange Commission (SEC) approved Rule 6c-11 under the 1940 Act, which will allow most exchange-traded funds (ETFs) to operate without the expense and delay of obtaining an exemptive order. The new rule provides greater flexibility to all issuers looking to launch new products filed as open-end funds in a streamlined approval process with a quicker time to come to the market. The new rule applies to both index-based and actively managed transparent ETFs. This rule cannot be applied to leveraged/inverse ETFs, unit investment trusts, master-feeder funds or share class ETFs.
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It is hard to believe that it has been an entire year since the COVID-19 pandemic forced asset managers fully into the realm of virtual selling with a heightened focus on digital engagement. Some firms were better prepared for this transition than others. But overall, asset managers managed to pivot quickly and flourish amid the unprecedented environment of uncertainty.
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