Technology penalising active managers, forum told
While technology is improving the standards of client servicing and enabling complex portfolios to be monitored more clearly, it is also squeezing active fund manager talent at the same time, an AsianInvestor forum heard this week.
JH Rhee, chief executive officer at Mirae Asset Global Investments, told our annual Art of Asset Management conference that innovative technology involved in vehicles such as exchange-traded funds and smart-beta strategies was shrinking the talent pool of managers able to deliver alpha.
"It’s very hard to find top-tier talent that can match investment technologies,” he said during the opening CEO roundtable discussion on industry issues. “We are being penalised by technology.”
An interactive audience poll underlined the challenges fund firms are facing. Asked what the top front-office priority was for their firm over the next three years, 31.6% pointed to the acquisition of new talent. Interestingly, data integration came second with 18.9%, followed by performance analytics (17.9%) and skills training (16.8%).
Jean-Pierre Leoni, head of Asia Pacific for AXA Investment Managers, said strong technology was crucial for client services. Without it, timely client reporting, quick data processing and data security would be impossible, he argued.
“We’ve been looking at a global model [for technology] that could provide us with more information,” said Gerry Ng, CEO for Asia ex-Japan at Baring Asset Management.
Leoni noted that technology was AXA IM’s biggest operational investment, and described keeping up with the constantly changing evolution as a big challenge.
Better product accessibility and innovative technology had helped to boost investor sophistication, observed Rhee, partly driven by increasing demand for multi-asset and alternatives products.
Moderator Wai Kwong Seck, head of Asia Pacific global markets and global services at State Street, suggested that technological advances had helped in the oversight of complex portfolios. “Because many of these [sovereign wealth] funds use external managers, their ability to see through complex portfolios requires tremendous integration of data from different sources,” said Seck, who also sits on the risk management committee of a sovereign wealth fund.
In two further polls, regulation was flagged as the audience's most pressing concern. When asked what the biggest risk to their business would be over the next 12 months, 40% pointed to regulatory risk. That was followed by market risk (22%), operational risk (19%), reputational risk (10%) and data security risk (9%).
Regulation was also seen as the top challenge when it comes to launching new products, followed by selection of distribution platform, internal consensus on strategy, operational and technology infrastructure, optimal fund structure or domicile, and building talent.
Staying on the edge of what is allowable from a regulatory perspective was the job of fund managers, Leoni suggested.
Rhee noted that Mirae Asset Global Investments was building up its compliance capabilities to maintain the level of oversight being demanded by regulators for complex vehicles.
“There’s a coming together of [regulatory] jurisdictions,” noted Ng. He suggested that as a global organisation it was paramount to be compliant to ensure best practices across the board.