Fitch Ratings says that European asset managers need to adapt their product shelves and staffing to reflect new macroeconomic trends.

In a special report released Monday, Fitch argues that the shift of economic power towards emerging markets, coupled with lower growth in the western world, increasing globalization and the changing scope of banks, with less syndication, market making and prop trading, will require European asset managers to think beyond their domestic boundaries, mainstream asset classes and traditional fund management practices.

“Fundamental changes that are affecting the global economy and capital markets are imposing adjustments to product development, culture, staffing and decision-making processes at asset managers,” says Aymeric Poizot, head of Fitch’s EMEA fund and asset manager rating group.

The rating agency says that asset management companies that become more international, and develop a culture of innovation will be best-positioned to improve their performance in this new climate.

“Asset managers also need to adapt investment processes to less directional capital markets, volatile liquidity and increasing correlation,” it says. Also, Fitch believes many asset managers will need to review risk and portfolio diversification assumptions, increase integration between risk management and portfolio management, and create more holistic research capabilities, through cross-asset research or political/geopolitical analysis. Managers must also give greater consideration to behavioural and technical factors, and provide more dynamic asset allocations, it says.

IE