Indus Valley Partners (IVP), a provider of technology solutions to the buy side, has announced today its 2020 trend outlook for the asset management community. With a growing demand for scalability and transparency throughout the front, middle and back office of funds, IVP continues to adapt to client needs by leveraging the latest advancements in technology and expertise to assist with a manager’s generation and retention of alpha.
Supporting both alternative and traditional asset managers for two decades, IVP has seen firsthand the evolution of the industry and how the successful managers of today took the strategic steps needed to transform to meet new demands. Asset management’s time for transformation was the theme for 2019 but as we move deeper into 2020, traditional and alternative managers must now activate their edge by embracing “digital-first” outsourcing providers, native cloud platforms and data management core competencies in order to truly thrive. As we look ahead, the following trends will begin to take shape:
Broadscale Cost Reduction – Hyper-outsourcing becomes vital for success
In order to succeed in 2020 and beyond, asset managers will need to continue the evaluation of their infrastructure in an effort to significantly reduce firm-wide operational costs. Funds will need to focus heavily on hyperoutsourcing and building a “digital-first” asset management model, picking specialist providers for specific functions and using APIs to integrate them into their infrastructure for transparency. By harnessing the flexible and scalable approach of hyperoutsourcing, managers will enable their fund to start with a focused offering and subsequently create visible efficiencies. From here, these efficiencies can enable the next phase of evolution by setting a sustainable, long-term operating model transformation in motion.
Customization & Capabilities – Investing in growth areas (Private Credit, Private Equity, etc.)
As managers move to reduce operational cost through hyperoutsourcing, they will also have to keep one foot on the innovation accelerator. This growth will be primarily focused on building new roads into investment areas such as private credit and developing custom solution capabilities to meet both client and market demands that will help firms differentiate against competition. However, a comprehensive data management capability is a necessary foundation to build any new offering on and allow for continuous innovation. Managers turning to custom solutions and new markets, such as private credit, will need to reevaluate their infrastructure and technology in order to enable more flexibility within their current platforms demanded by new sources of data and analytics, especially in high margin, high growth private markets.
Data Analytics & Cloud – Fintech innovation finally starts to deliver on its promise
Asset managers are readily adopting public cloud substrates and actively building capabilities as they continue to establish massive data infrastructures. 2020 will mark the true convergence of native cloud technology and financial innovations as asset managers establish data lakes, machine learning algorithms and analytics available in native substrates to empower deeper insights. This innovation and shift will provide managers with a cost-effective way to drive data and insights experimentation as well as bolster front-office offerings, which can potentially enable competitive advantages.
“2019 proved to be a crucial year for asset managers as a multitude of external pressures began to mount, causing the incremental shift towards automation and hyperoutsourcing in an effort to transform operating costs, but more is needed to enable high margin product growth in private markets,” said Gurvinder Singh, CEO of Indus Valley Partners. “We have now entered an era of no return where the industry is being forced to fully execute on this transformation in order to survive in an environment of heightened margin compression and growing AUM appetite.”