Phil Masterson Opalesque Industry Update - Uncertain Economic and Regulatory Environments are Increasing Concerns About Future Business Growth
A majority of investment managers (57 percent) are optimistic about their firm’s prospects over the next three years, according to a poll released today by SEI.
The poll, conducted at SEI’s annual CFO Forum for Alternative Investment Managers in London, found that positive market prospects were the main reason behind this optimism. However, the remaining participants (43 percent) were concerned about their firm’s prospects, marking a substantial increase from the minority (12 percent) who expressed concern in a similar poll conducted in April. Of those with a pessimistic outlook, most cited negative market prospects, weak branding, and uncompetitive performance as prominent concerns. Additionally, 44 percent of participants revealed that economic uncertainty will be the most significant challenge facing the industry in the near future.
Also weighing heavily on the minds of investment managers is the regulatory climate. Two-thirds (67 percent) of those polled listed regulation as a critical consideration in domicile selection. Furthermore, respondents argued that satisfying regulatory requirements is their firm’s greatest operational challenge, even more so than satisfying investor expectations.
However, managers still have their focus on investors, especially given that a majority (55 percent) indicated that investor confidence is worse or has not improved since the aftermath of the financial crisis. Conversations at the forum touched on the heightened due diligence managers are facing, as well as the increased transparency investors are looking for when it comes to understanding where and how returns are generated.
“Optimism is understandably tenuous at present since investment managers are facing an empowered investor base, an avalanche of regulations, and an uncertain economic climate.” said Phil Masterson, Managing Director for SEI’s Investment Manager Services division. “However, it’s reassuring to see that firms continue to focus on the future and work on identifying growth opportunities. It is clear that managers are under pressure and need help from their partners in order to focus on their core business and ultimately thrive in the uncertain economic climate and unrelenting regulatory environment.”
When identifying where they see opportunities, respondents pinpointed institutional assets as the biggest contributor to future growth, with only 11 percent believing organic growth would be a key factor. When focusing more specifically on the investor types or channels that promise the greatest growth, investment managers cited pension plans. The vast majority (73 percent) also stated that there will be a substantial increase in interest towards hedge fund compliant UCITS funds over the next year.
The poll was completed by CFOs, COOs, and senior executives across management operations, distribution, and investment professions.
SEI's Investment Manager Services division provides comprehensive operational outsourcing solutions to global investment managers focused on mutual funds, hedge and private equity funds, exchange traded funds, collective trusts, and separately managed, as well as institutional and private client, accounts. The division applies operating services, technologies, and business and regulatory knowledge to each client’s business objectives. Its resources enable clients to meet the demands of the marketplace and sharpen business strategies by focusing on their core competencies. The division has been recently recognised by the Money Management Institute as “Service Provider of the Year,” by Buy-Side Technology as “Best Fund Administrator,” and by HFMWeek as “Best Single Manager Hedge Fund Administrator (Over $30B AUA—US),” and “Best Funds of Hedge Funds Administrator (Over $30B AUA—Europe).” www.seic.com