Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Are you reframing the future of asset management or is it reframing you?
Ernst and Young (EY) has released a research publication titled the “Future of asset management.” As the title suggests, a transformation in the way asset managers are positioned, and their global outlook, is required, so that long-term value can be created for all stakeholders.
EY says: “The industry needs to rethink its purpose and position in society. Individual firms should sharpen their agility, growth prospects and sense of purpose.”
As Covid-19 hit, it disrupted financial markets and really brought out the industry’s weaknesses. Asset managers were able to respond quickly by reassuring clients and transitioning to remote working. Despite all the commotion, liquidity and valuation challenges were met and funds performed well.
However, the next five years are going to be a lot tougher for asset managers. Factors such as geopolitical uncertainty, lost output, low rates, high inflation and an increase in interest rates cannot be ignored. EY says markets could be thrown into a prolonged correction or period of weak performance.
EY says asset managers need to make significant changes to their strategies and business models if they’re to succeed in this increasingly fluid and challenging environment. “Firms must pursue multiple avenues of growth; invest heavily in data and technology; and take a flexible approach to partnering, collaboration and mergers,” it says.
So how should asset managers respond?
EY lists six ‘strategic cost transformations’ that are needed to fuel investment in organic and inorganic growth. Here are the six components that CEOs should focus on:
- Re-orient the business around the client
- Complete the digital transformation of distribution
- Reimagine the investment proposition
- Maximise growth areas
- Transform the business model
- Leverage inorganic opportunities
EY says asset managers that have used the disruption of “COVID-19 as a springboard to lasting success also need to begin actively preparing for the end of current industry paradigms. Firms should imagine radical but plausible scenarios, identify their strategic implications and begin planning their responses while they still have time.”
In conclusion, delivering long-term value right now, has never been more important for the asset management industry. Covid-19 will fade into the background, and the world will recover. But what will be different are the needs of the future, that won’t be the same as the past. EY says “We need to ensure we don’t squander this opportunity to elevate the purpose of asset management, thereby delivering greater benefits to investors and society.”
