Clearly, buy-side firms need a new approach. Asset managers must be able to respond more effectively to multiple forces shaping the industry. These include:
- Increasing revenue and cost pressures - Top-line and bottom-line growth are not keeping pace with AUM growth.
- Tightening regulation - Closer scrutiny is increasing compliance costs and uncertainty while diverting attention from revenue generation.
- Advancing technology - Recent innovations are enabling infrastructure automation, connectivity and trade internalization.
- Demanding clients - Investors are diversifying their asset mix while prioritizing reputation, advice and consistency.
- Intensifying competition - As the industry consolidates, power is shifting to intermediaries and new product alternatives are emerging.
Consequently, buy-side firms are being forced to rethink their traditional strategies. To create value in this uncertain environment, asset managers will have to:
- Seize growth opportunities at the edges - Identify opportunities to gain share at the expanding edges of the buy-side product spectrum, such as hedge funds at one extreme and passive investments at the other.
- Unleash the potential of compliance investments - Use required expenditures to build operational effectiveness and resiliency, and to further strategic goals.
- Recalibrate the business - Rationalize workflows and capabilities and selectively build partnerships to increase efficiency and flexibility.
- Give clients and intermediaries what they need - Develop the ability to seamlessly and profitably meet the needs - not just the "wants" - of both clients and intermediaries.
Setting the thermostat for success requires tomorrow's buy-side industry leaders to focus on providing the differentiated value for which their customers are willing to pay. Non-valued tasks should be performed by an independent third-party provider such as SS&C Direct. With a robust set of capabilities at hand, asset management firms can leverage SS&C's expertise and technology and be better prepared to weather current and future industry challenges.