Forget about picking stocks. Mining data will matter more.
Asset managers are being squeezed as increased regulation drives up costs and investors shift more money into lower-cost investment products.
The solution? The greater use of technology and data-mining to defend margins, reduce expenses and win more client business. For anyone contemplating their career in fund management, the message is clear.Re: the bolded bit, yesterday's "Now the Important Stuff: How to Name Your Hedge Fund" touched on not being able to retain investors with performance:
The annual industry study published by Oliver Wyman and Morgan Stanley this month makes for bleak reading. While assets under management rose last year, that growth was flattered by rising asset valuations. As a whole, the industry has seen outflows in the past three years, with smaller players suffering more than their larger peers.
One way big asset managers have been able to avoid some of the outflows inflicted on their smaller peers is by being more nimble in expanding their offerings of alternative investment products -- things such as private equity, for example.
While alternatives still only account for about a tenth of assets, they contribute about 30 percent of revenue, and Oliver Wyman sees that growing to about 40 percent by 2025. That trend will continue to benefit the bigger players able to offer a wider range of investment strategies.
What's more worrying for the industry as a whole is that the growth in assets under management isn't translating into an equal increase in revenue. Costs, meantime, are rising at almost the same speed as income. Looking ahead, the picture isn't much better.
In the report's most bearish case, accelerating inflation leads to central banks tightening policy, driving down asset prices and putting active managers under even more cost pressure. Even under Oliver Wyman's bull case, with asset prices benefiting from growing economies, passive strategies will underperform and fees will be under pressure....MORE
There are a number of hard problems in investing, for instance:
1) Finding alpha.
2) Finding clients and assets — especially if you can’t 1) consistently find alpha.
3) Finding an awesome name for your fund....