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Investing

Global investors see tech, new entrants, M&A to reshape landscape

Global institutional investors believe technology, new entrants to the industry and further consolidation will dramatically reshape the investment landscape by 2025, results of a new survey by Fidelity Institutional Asset Management said.

The Fidelity Global Institutional Investment Survey revealed that 62% of institutional investors believe that by 2025, trading algorithms and quantitative models will make markets more efficient, while 80% believe that by that same year blockchain and similar technologies will change the industry in a fundamental way.

Most respondents (75%) also said they find it likely that non-financial technology firms will enter the industry and those new entrants could cause some traditional firms to merge or be acquired.

Jeff Mitchell, chief investment officer of FIAM, said in a phone interview that he was struck by the disparity between how the institutional investors from the Americas responded vs. those from the rest of the world.

For example, when asked how strongly asset owners were influenced by socially responsible investing, only 21% of the respondents in the Americas said they were moderately or strongly influenced, whereas 75% of respondents from Europe ex-U.K. were moderately or strongly influenced. That figure was 74% in the U.K. and 64% in Asia.

"I was struck by what a meaningful gap there was between the responses from Americas and those from the rest of the world," Mr. Mitchell said.

Respondents also believe the competitive landscape will likely intensify as the investment industry continues to adopt artificial intelligence. But some institutions, particularly those based in the U.S., have yet to allocate resources to such technologies.

Roughly one-third of institutions around the globe are not currently testing or considering how AI and advanced analytics could be useful to their investment process. That number grows to 77% in the U.S.

Many institutions expect to soon rely on AI for such capabilities as asset allocation (69%), performance and risk evaluations (67%) and creating custom portfolios (39%).

More than half of respondents (53%) believe technology will replace traditional investment roles. However, many believe in the continued importance of the human touch, with the majority of those surveyed (60%) believing that AI will augment rather than replace jobs.

In addition, when asked if they've explored new ways to incorporate technology, the response rate for already exploring was only 29% in Americas vs. 88% in the rest of the world.

Other themes that "jumped out" to Mr. Mitchell when compiling the results of the survey were the "importance of a relationship" between asset owners and money managers, "the need for investment managers and investment partners to adapt to client needs over time (and) a demand for more dynamic capabilities."

"Going forward, co-creating (customized strategies and solutions) with clients will be very important for investment managers," Mr. Mitchell added.

The Fidelity Global Institutional Investment Survey collected the responses of more than 900 institutional investors from 25 countries representing $29 trillion in assets.