From AI to ESG: The Key Trends Shaping Investment Management

June was a busy month for ipushpull with several conferences taking place before the summer recess. Having had some time to reflect on each conference we start our review of the key themes and insights with the Investment Association Annual Conference. This year, the major focus was on how technological innovation and transformation are reshaping the investment management industry and ipushpull are proud members of The IA Engine - FinTech accelerator from The Investment Association.

Reshaping the Industry

Technological innovation is fundamentally transforming the investment management industry. From the rise of artificial intelligence (AI) to the integration of advanced data analytics, technology is revolutionising how investment managers operate. This transformation is not just about adopting new tools; it's about rethinking processes, strategies, and products to leverage these innovations effectively.

Key Drivers:

• Efficiency: Technology helps streamline operations, reducing costs and improving productivity.

• Data Utilisation: Advanced analytics and AI allow for better data analysis and decision-making.

• Personalisation: Technology enables the creation of personalised investment products and services.

Barriers:

• Legacy Systems: Many firms struggle with outdated technology stacks that are not equipped to handle new innovations.

• Cost: The initial investment in technology can be high, and there’s a continuous need for updates and maintenance.

• Skills Gap: There is a growing need for professionals skilled in both finance and technology.

Fostering a Culture of Innovation

To truly harness the power of technological transformation, investment managers must foster a culture of innovation within their organisations. This involves:

Encouraging Experimentation: Create an environment where employees feel comfortable experimenting with new ideas and technologies.

Collaborating Across Industries: Learn from other sectors that have successfully integrated technology to enhance their operations.

Investing in Talent: Hire professionals who have both technical expertise and an understanding of financial markets.

Enhancing Investor Experience

Technology is also playing a crucial role in enhancing the investor experience. By leveraging AI and data analytics, firms can provide more personalised and effective services.

Personalised Portfolios: New technology approaches enable the creation of tailored investment portfolios that meet individual investor needs.

Improved Communication: Platforms that offer seamless integration across applications, improving data-driven services and workflows.

Market Insights from BCG

According to Boston Consulting Group’s 22nd edition of the Global Asset Management Report, AI and the Next Wave of Transformation, the global asset management industry saw total assets under management (AuM) rise to nearly $120 trillion in 2023, marking a 12% increase over 2022. However, this growth masks underlying vulnerabilities.

Revenue vs. Costs: Despite the growth in AuM, industry revenues increased by just 0.2% in 2023, while costs rose by 4.3%, leading to an 8.1% decline in profits.

AI and Productivity: To remain competitive, asset managers must embrace AI to enhance productivity, personalise products, and tap into private markets. However, many firms are not yet equipped to fully leverage these technologies.

ipushpull’s sweet spot is to provide better access to information and increased productivity for ‘investment management and trade execution’ and ‘operations’,  delivered through omnichannel access and workflow automation, and through tactical AI solutions to bring immediate value at an affordable price point. 

Best Practices in Technology Adoption

Some proven practices for integrating technology effectively include:

Hiring Data Scientists: Investment firms are increasingly hiring data scientists to analyse data and automate workflows. Digital teams are now integral to strategy processes.

Leveraging New Technologies: Companies like ipushpull are transforming end-user experiences by delivering data directly to clients' preferred applications through no-code platforms.

Tokenisation of Assets: The IA Technology Working Group is exploring tokenisation to enable asset fractionalisation and increase liquidity.

Focus on ESG

Environmental, Social, and Governance (ESG) considerations remain a priority for asset managers. Despite seeming quieter more recently, ESG factors are crucial in the investment process, particularly in how capital is allocated to address climate change and sustainability. One comment that resonated in many ways was that, “if you don’t stand for something you stand for nothing!” Which is a play on a well know quote that, “if you don’t stand for something you'll fall for anything,” which has many connotations from AI to ESG!

Data Standardisation: There is a need for greater standardisation around ESG ranking scores to ensure consistency and reliability.

Trends in Investment Strategies

Index vs. Active Management: Passive investments continue to dominate in terms of AuM but generate less revenue compared to active investments. This imbalance highlights the need for increased productivity and efficiency.

Customisation vs. Cost: While customisation brings added costs, it is essential to balance these against customer choice and preference.

Fixed Income Allocation: There is an expectation that increased fixed income allocation is likely in the coming years while “rates stay higher for longer,” which should drive larger flows into the bond markets.

Conclusion

The Investment Association Annual Conference highlighted the transformative impact of technology on the investment management industry. From AI and data analytics to blockchain and cybersecurity, the industry is evolving rapidly. However, this transformation brings both opportunities and challenges. By fostering a culture of innovation, embracing new technologies, and staying ahead of regulatory requirements, investment managers can navigate this changing landscape effectively and provide a better, more personalised experience for their investors.

ipushpull is well placed to support the changes in workflow tools and AI by transforming buy-side efficiency and productivity across the trade lifecycle. ipushpull’s omnichannel connectivity allows seamless integration across platforms, configurable transformation and routing, unified standardisation and warehousing, thereby allowing consistent data formatting and efficient storage. To find out more, visit our Asset Manager solutions page. If you would like to discuss your specific requirements with us, feel free to contact us.