Niche investments and technology are among the keys to success in global asset management in 2017, according to a new report from Cerulli Associates.
The Global Markets 2017: How to Succeed Internationally report finds that fee compression and the need for specialist advice are changing the complexion of the asset management sector.
“The traditional distribution model is changing and managers must invest in technology and product development to stay relevant,” said Barbara Wall, Europe managing director at Cerulli.
For example, market dynamics favor the growth of passives, but the larger passive funds get, the more inefficient they become.
According to Cerulli, active managers therefore have an opportunity to enter the lucrative passive space. However, instead of seeking to compete with the dominant passive players, the report suggests that active managers should look to offer niche investments such as fixed-income exchange-traded funds and strategic beta funds.
Another thing to consider with traditional models is millennials’ investment behaviors, according to Wall.
“Millennials (broadly speaking, those born after 1980) are becoming an increasingly important segment for fund houses globally,” she said. “They display different investment behaviors from the Baby Boomer generation, exhibiting a greater interest in environmental, social, and governance products, for example.”
Fee compression is another overarching trend globally, according to the report.