Today’s asset managers are facing a slew of challenges, including changing views on ESG, the rise of artificial intelligence (AI), market volatility and the emergence of private markets, according to a survey from the Index Industry Association (IIA).
Released Tuesday, the association’s fourth annual Survey of Global Asset Managers offers a glimpse into how asset managers in the U.S. and Europe view different issues, as well as the key factors shaping the industry.
“Asset managers globally are grappling with both short-term volatility and more profound, longer-term structural forces tied to technological innovation and the growth of new markets,” said Rick Redding, CEO of the IIA, in a release.
“While each of these forces has its own drivers and momentum, together they add up to an asset management environment of growing complexity with new areas of risks and opportunities.”
Embracing AI
Two-thirds of asset managers surveyed said generative AI/machine learning was the topic raised most frequently by their firms and colleagues over the past 12 months.
On average, the survey found that 18.8% of employees at firms already use AI tools, including virtual assistants, for their work. Tasks performed by AI include providing personalized financial advice based on transaction history, assessing market risks, analyzing market trends and optimizing portfolios.
Asset managers said they expect AI usage to grow over the next year, with the average proportion of employees using it expected to reach 27.7%.
Private markets
Asked about the emergence of private markets, asset managers shared mixed views. About 37% said they saw it as an opportunity, 29% said it posed a challenge and 34% saw it as neither.
Among those who saw private markets as an opportunity, the top reasons cited were diversification of offerings (63%), improved investment performance (46%) and positive impact on long-term positioning (32%).
Asset managers who perceived private markets as challenging cited difficulty integrating private investment offerings and liquidity concerns.
ESG views
Roughly 51% of asset managers said sustainable investing was the topic most frequently mentioned by their firm and colleagues over the last year, second to AI.
Respondents said client demand (59%) was the top factor driving their ESG investing policy and strategy. Other factors included the company’s leadership (37%), government policy makers (33%) and regulators (32%).
As well, 39% of managers considered ESG an opportunity for their business, while 17% considered it a challenge. Another 56% said it posed neither.
Index providers
The survey found that 87% of asset managers use index providers. On average, asset managers used four such providers.
About 52% of asset managers said index providers and their services would become more important to their firm’s success over the next year.
Also, 20% of asset managers said they expected to increase their use of index providers over the next 12 months, while 6% expected the use to decrease.
Asset managers also expressed a desire for more technology integration from index providers. About 27% said they wanted to see the application of AI in indexes, 25% said they’d like to see more customized indexes and 24% said they wanted to see direct-indexing solutions and support (24%), among other things.
Methodology
The IIA survey was conducted independently by research firm Opinium between April and May 2024. A total of 300 chief financial officers, chief investment officers and portfolio managers across Europe and the U.S. participated in the survey.