After two decades of change in the UK institutional investment market, asset managers continue to see the market place shift. As our last blog explained, great opportunities exist for those managers who can match this evolving client need.
But many asset managers are finding their ability to succeed in these changed market conditions are often shaped by their own business model. Remaining profitable requires a hard assessment of the challenges and opportunities this presents and adapting your strategy to these realities.
After decades of talking to asset managers and owners, we see asset managers falling into four different business models, each with their own strengths and weaknesses.
Mega manager
The largest global asset managers who count their assets in the trillions can rightly be described as mega managers. They have offices in every region and managers across almost every asset class.
This breadth of expertise makes them attractive to owners looking for a more collaborative relationship because they can have deep resources and are able to customise and offer expertise.
But their global scale can also create problems because political polarisation between regions can make hard for these managers to create consistent sustainable investment messaging.
That often leads to paralysis or frequent changes in strategy which is a particular issue for asset owners looking for managers who match their sustainable philosophy.
Merged middle
These asset managers have reacted to the rapid change by hoovering up other asset managers to create a more complete range of products
But mergers can often create as many problems as they solve – causing years of confusion and change.
A merger does not guarantee growth. A new corporate identity needs to be established. This can make it hard to set a clear business strategy which makes it difficult to build deep client connection.
For a merged middle manager to be successful, they need to be clear eyed about what client problems they can solve. And remain focused on those client problems before, during and after the acquisition.
Multi acquirer
The multi acquirer takes other asset manager under their ownership allowing them to preserve their identity in return for a reducing costs of central services like compliance and marketing.
These managers are now finding it difficult to compete.
With asset owners wanting a more collaborative relationship with managers, this disintermediated model makes that hard to achieve. The individual managers often lack direct client contact making building a deep understanding of client need difficult.
So many brands under one umbrella can also make clear communications harder. For example, whose sustainable investment strategy should the asset owner follow? That of the corporate overlord or the individual brand?
Achieving future success with these asset managers requires focusing on which client need they can best service and meeting that need.
Marked clarity
Another way to think of these asset managers is as a focused manager. Among the smallest asset managers, these have a particular specialisation. It might be an asset class or it could be a well-thought approach to sustainable investment.
While these managers will not be able to provide the same resources or breadth of expertise as a mega-manager, asset owner value their unique perspective and innovative approach. If these managers can clearly communicate how they help to solve client problems, they have a good chance of success.